Should My Lifetime Mortgage Be Drawdown or Lump Sum?

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How Does a Lump Sum Lifetime Mortgage Work?

How Does a Drawdown Lifetime Mortgage Work?

Things to Think About Before Deciding

A lifetime mortgage is a way for homeowners over 55 to unlock equity from their property without having to move.

Deciding whether to take the money as a lump sum or through a drawdown facility depends on your plans, financial situation, and how you feel about interest building up over time.

Both options have their benefits, so understanding how they work can help you choose the right one.

How Does a Lump Sum Lifetime Mortgage Work?

A lump sum lifetime mortgage gives you the full amount in one go.

This can be useful if you have a specific financial need, such as paying off an existing mortgage, funding home improvements, or helping family members.

Because you receive all the money upfront, interest starts accumulating on the entire loan from day one. Over time, this can lead to a much larger repayment amount, especially if no repayments are made.

Some lenders allow voluntary payments to reduce the overall cost, but the total owed will still grow faster compared to a drawdown option.

How Does a Drawdown Lifetime Mortgage Work?

A drawdown lifetime mortgage lets you release smaller amounts when needed, rather than taking everything at once.

This means you have a cash reserve available but only pay interest on the money you actually withdraw.

This option suits those who want flexibility, perhaps to top up their retirement income, cover unexpected costs, or make home improvements in stages.

By limiting how much interest builds up, it can be a more cost-effective way to borrow.

Things to Think About Before Deciding

Your choice will depend on what you need the money for and how you want to manage borrowing over time.

A lump sum might be best if you need a large amount straight away, while a drawdown mortgage can help spread costs and reduce interest charges.

Some things to consider include:

• Interest starts building on a lump sum straight away, while with drawdown, you only pay interest on what you take.
• If you’re likely to need extra funds in the future, a drawdown facility can offer more flexibility.
• If leaving an inheritance matters to you, a drawdown mortgage could help reduce the total owed, as less interest builds up over time.

Choosing between these options isn’t always straightforward, so speaking to an expert can help.

UK Moneyman has a team of lifetime mortgage advisors who can talk through your options and help you find the right solution for your circumstances.