For those of you who know what a Lifetime Mortgage is in terms of equity release mortgage plans, then you already have some idea about Drawdown plans. The Lifetime equity release mortgages plan takes some of the money that you have invested in your property and gives it to you for spending purposes and you don’t have to pay taxes on it and you will not have any monthly payments. It is something like a loan but it is repaid either after you move or pass away.
Drawdown plans are similar to this but they are more flexible. The main difference is that you don’t receive the money all at once with this plan, but you receive it in smaller increments when you need or want it. As the process goes, you decide how much money that you want to take from the value of the property and it is put aside for you. Whenever an expense arises that you have to deal with, or whenever there is something that you want to purchase, you access the amount of money that you need. You can also arrange a monthly payment if desired.
This plan offers many different benefits including the fact that you only have to be fifty-five years of age to apply. You won’t have to pay the money back while you are living in that home. The payments start after you pass away and the home is sold or after you permanently move to a different home. You don’t lose ownership of the home either so you can renovate it to increase the value or make any changes that you would like.
Since there is a guarantee attached that the loan will never be worth more than the value of the home, so if the housing market loses value, then you are not running higher into debt, and it won’t be passed along with the estate. If you take out a higher amount of money than you use, you will not have to pay interest on the full amount. You will only ever have to pay interest on the sum of money that was taken out and used.
There are of course a few points to consider when applying for it. The inheritance that you leave behind will decrease because the amount of money owed is taken from the sale of the home. If you choose to repay the loan early, you may have to pay a fee for that. Though there are these few disadvantages to consider, when weighing the consequences for not having financial security, it is worth it.