EQUITY RELEASE WILL REDUCE THE VALUE OF YOUR ESTATE AND CAN AFFECT YOUR ELIGIBILITY FOR MEANS TESTED BENEFITS.
How does it work?
Similar advantages and disadvantages as a regular lifetime mortgage, with additional issues that are unique to this kind of equity release scheme. The main difference is that you don't request the full sum of money available to you immediately. Instead, you decide on a maximum amount of equity you want to release, and 'drawdown' the cash in stages as and when required.
ADVANTAGES
You are in control of your money as you can release cash when it suits you , or you may be able to request a monthly income with no monthly payments to make
You retain full ownership of your home
You only pay interest on the amount of equity released from your home, so interest could accumulate more slowly than with a regular lifetime mortgage
Drawdown Lifetime Mortgage plans may be available to younger people (aged 55+)
Some Drawdown Lifetime Mortgage plans let you guarantee an inheritance for your family
DISADVANTAGES
Interest rates are usually higher than on a standard lifetime mortgage
Reduced amount available to leave as an inheritance
Interest grows quickly as it is compounded
If you want to increase the amount of equity released beyond the original amount agreed, you would normally have to apply for a further advance, which is not guaranteed
If you repay the lifetime mortgage loan early, you may have to pay an early repayment charge
Your tax position and certain state benefits may be affected
