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Ways you can access cash
Lifetime mortgages let you keep 100% ownership of your property and give you a number of ways you can access cash from your home depending on your goals.
If you have a number of large purchases in mind or intend to gift a lump sum to children or grandchildren to use as a deposit to buy their own home, you can consider a single lump sum mortgage. You can return later to arrange another single lump sum release with the same lender.
If you would like an initial lump sum and amounts in the future, you can consider a drawdown mortgage with a future advance arranged. You only pay interest on the amount you borrow and when you need more cash, the lender can quickly make a payment to you.
The higher the percentage of the property value released the higher will be the interest rate you pay as the risk to the lender increases.
Lump sum mortgage plans
Lump sum mortgage plans provide a one-off lump sum amount with no restrictions on how you spend your money.
This is known as a lifetime mortgage which is a loan secured against your home with no monthly repayments and is repaid when it is sold but allows you to live in your property for your lifetime.
The loan can be secured as a variable or fixed rate of interest with an equity lump sum at once, however, if you need smaller amounts over time you can use a drawdown lifetime mortgage.
Other variations can be included such as taking account of your medical conditions with enhancements offering a larger loan or interest plans allowing you to pay off the interest rather than opting for rolling up until you are aged 80.
The interest is typically rolled-up over the life of the mortgage resulting in interest being paid on interest over time, increasing the cost of the loan when it is eventually repaid.
To avoid this, some plans allow you to make a penalty free repayment of up to 10% of the loan and this would allow you to pay the interest as you go along, limiting the amount owed to the lender.
The amount you can borrow is based on the value of your property and your age as lenders offer much larger loan to values (LTV) if you are aged 85 compared to age 55. For a property value of £400,000 lenders would offer the loans shown in the following table:
| Lump Sum - maximum equity release |
| Your age |
Loan amount |
LTV |
| 55 |
£96,000 |
24% |
| 60 |
£136,000 |
34% |
| 65 |
£156,000 |
39% |
| 70 |
£176,000 |
44% |
| 75 |
£200,000 |
50% |
| 80 |
£220,000 |
55% |
| 85 |
£232,000 |
58% |
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A lifetime mortgage allows you to retain ownership of your home without the need to make payments as both the original loan and interest is rolled up to the end of the plan.
As you own 100% of your property you will benefit from equity growth in the future.
For example if your property value is £400,000 and you use equity release with a loan for £100,000 paying fixed interest of 4.2%, with no growth in house prices after 15 years there would be £214,640 of equity. If house prices rise by an average of 3% each year the equity portion increases to £437,827.
Interest rates are historically low with lifetime mortgage plans offering fixed rates from 3.50% subject to eligibility and suitability of plans to your needs.
Drawdown mortgage plans
Lump sum mortgage plans provide a one-off lump sum amount with no restrictions on how you spend your money.
Drawdown mortgage plans (also known as flexible plans) are like lump sum mortgages except they allow you to arrange an initial equity release with a facility to take chunks of equity over time with no restrictions on how you spend your money.
If the maximum equity release is not needed initially, a drawdown mortgage plan lets you arrange a loan to value known as an advance to access this without the need for a further mortgage in the future.
You benefit as you pay interest only on the cash lump sum you need from the advance and this would reduce the total amount of interest payable over the term of the plan.
As an example, if you have a property valued at £300,000 you could agree an equity release loan of £100,000 taking a lump sum of £60,000 initially. You would pay interest on this amount and retain a facility for a further £40,000 with no interest payable.
You have greater flexibility with a drawdown plan rather than a lump sum plan and more control over the amount you take which could help you when claiming means-tested benefits or to fund specific purposes such as home improvements, holidays or covering a large purchase.
In a survey conducted by Just Retirement about why people use equity release people using drawdown the average house price is £292,555 compared to those taking the full lump sum from a lifetime mortgage with a property value of £245,538.
Drawdown mortgages offer the same loan to values (LTV) as lump sum mortgages and for a property value of £400,000 lenders would offer the loans shown in the following table:
| Drawdown - maximum equity release |
| Your age |
Loan amount |
LTV |
| 55 |
£100,000 |
25% |
| 60 |
£124,000 |
31% |
| 65 |
£152,000 |
38% |
| 70 |
£176,000 |
44% |
| 75 |
£192,000 |
48% |
| 80 |
£212,000 |
53% |
| 85 |
£216,000 |
54% |
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The disadvantage is that the drawdown advance is it can be withdrawn in the future and is not guaranteed to be offered. The interest rate you pay will be the market rate at the time which could be higher compared to the initial cash sum.
The interest rate for the drawdown plan could be higher than the lump sum mortgage plan although this is not always the case with all lenders.
Must read links for equity release
Learn more about equity release and read our other pages about the types of lump sum and drawdown mortgages you can consider, alternatives to a lifetime mortgage and the steps you need to take to access cash from your home.
Ask us for a free equity release quote to see the maximum lump sum you can receive or the lowest interest rate for a specified cash amount from your home. Call Colin Thorburn on 020 8816 7501 to ask questions about your options.
Best Buys - Equity Release
Equity release lifetime mortgages
Lump sum and drawdown mortgages
Lump sum table - Maximum cash
Drawdown table - Maximum cash
Alternatives to a lifetime mortgage
Steps you take to access cash from your home
Free equity release quote
How can we help
As independent equity release advisers we do the work for you to search and find the best lifetime mortgages from the whole market. We also have access to unique offers not automatically available by lenders such as free valuations to help reduce your costs.
There are hundreds of products with varying terms & conditions which can have an impact on how you change the mortgage in the future. We can help you the technical aspects and advise you on the benefits of each lifetime mortgage lender.
We can recommend the most suitable and affordable options based on your needs now and in the future. Our service includes administration and advice which is Fee Free for loans over £60,000 as we receive a procuration fee direct from the lender. If the amount you are releasing is small, we will let you know if an additional fee would apply.
About Sharing Pensions
Sharingpensions.co.uk was created by its founder Colin Thorburn in 2001 to provide a resource to hundreds of thousands of people during retirement making their decision making easier and to select the best options.
Colin Thorburn has twenty years experience in retirement planning including equity release, is an individual authorised by the Financial Conduct Authority and business is submitted through Blackstone Moregate Ltd which is authorised and regulated by the FCA (no. 459051).
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