How does drawdown equity release work?
With a drawdown equity release plan, you agree an overall loan amount with your lender, take an initial lump sum, and keep the remaining agreed amount available for future withdrawals. This is a loan secured against your home, not a savings account.
The amount you can borrow will depend on the lender’s criteria, which typically include factors such as your age, property value, and health. The process starts with an equity release adviser who will assess your circumstances, explain the costs and risks, and help you understand whether drawdown is suitable for you.
Your home will be valued and your maximum borrowing limit assessed. You then choose how much to withdraw initially and how much to leave available for future needs. Interest is charged only on the amount you’ve taken out, not on the full amount you’re allowed to borrow.
In practice, if the agreed facility is £X and an initial withdrawal of £Y is made, interest will be charged only on the withdrawn amount (£Y) until additional funds are accessed.
The loan, plus any interest, is normally repaid when the property is sold, which usually happens after the last homeowner passes away or moves into permanent long-term care. Most drawdown plans offer features such as fixed interest rates, no mandatory monthly repayments, and options for early repayment or inheritance protection.
