Releasing Equity from your home with a Lifetime Mortgage and/or Drawdown facility or Further Advance
What is a drawdown facility?
When taking out a Lifetime Mortgage, the amount you will be able to borrow will be dependent upon your age and the value of your home.It is often the case that a small amount is required immediately and potentially further borrowing at a later date when emergencies crop up, like a broken boiler or a new car.
With a drawdown facility it means that you can apply for the maximum borrowing you are eligible for, but elect only to take what you require immediately and ‘draw down’ additional funds at a later date.The interest is only charged on the initial loan. The interest on the drawdown facility is not charged until you request to draw down these funds.It is important to note however, that future funds which you drawdown will be on the interest rate available at that time not necessarily at the rate you have applied for the initial amount of borrowing.
Is a drawdown facility the same as a further advance?
No.With a further advance, you have to apply for this once the mortgage is in place as an ‘add-on’ loan to the original mortgage.This again will be based on your age at the time of applying and the value of your home.Some providers of your Lifetime Mortgage will have a waiting period before you can apply for a further advance.
What are the main differences between a drawdown and a further advance?
The drawdown facility is set up when applying for the main Lifetime Mortgage meaning that it is readily available to you from the beginning of your Mortgage
There are no further arrangement/valuation fees to pay when drawing funds down from the drawdown facility
You do not have to have your home re-valued
You can usually receive the money from a drawdown facility within 5 working days
There is usually a minimum sum which has to be drawn down c£2,000, again this will vary dependent on which lender the Lifetime Mortgage is set up with.Some lenders may charge a small fee to cover the administration of drawing down further funds.
A further advance has to be applied forat a later date, once your Lifetime Mortgage isin place
There are usually further fees to pay, such as, Adviser Fees, Arrangement Fees to the Lender, Valuation Fees.These fees will vary dependent on the lender
Your home will usually have to be re-valued
The process can take 4-6 weeks to complete
A Lifetime mortgage will be secured against your home