Similar to a Lifetime Mortgage

A drawdown mortgage is similar to a lifetime mortgage. Drawdown mortgages let you release a good amount of tax-free money that is tied up in your home. There are no regular repayments with this mortgage and you own the home until it is sold. There is one big difference between the two mortgages one being that in at the start of your drawdown mortgage you will not get all the money available to you in a one lump sum. In a draw down mortgage you decide on a maximum amount of equity that you would like to be released and then you drawdown the cash in steps when you choose to, You can draw down monthly, quarterly, or even annually.

There is a huge advantage of a drawdown mortgage and that is you only pay interest on the money you have drawed down. This way you have the advantage of knowing that the money is available if you need it but you do not have to pay any interest until the money is used. This is much like the lifetime mortgage when the loan is paid back when the home is sold.

Advantages

Some other advantages of a drawdown mortgage are that you will own the home or property as long as you remain alive, cash can be dispensed when it is most convenient for you, interest is only paid on the amount of equity that was released and as a result of this the interest will increase at a slower rate than with a lifetime mortgage. Also some of the drawback mortgages offer some type of inheritance for your family members.

Disadvantages

Some disadvantages of a drawdown mortgage are that an early repayment charge may be incurred if you repay the drawdown mortgage too early; interest rates are often higher than with a lifetime mortgage, there are more rules on the minimum amount of money that you can release, and the amount that you can leave an inheritance will be greatly reduced.

To be on the safe side make sure you consult a financial adviser before you make any decisions on any type of mortgage loan.