Drawdown lifetime mortgages are the most popular type of equity release. Lenders provide a cash facility, from which an initial lump sum is taken. Funds remaining are held in a cash reserve, with no interest charged & can be withdrawn in smaller amounts, whenever required. This limits roll-up and saves interest over the long term.
Lump sum equity release plans are the simplistic form of lifetime mortgage with lenders offering a one-off cash lump sum. This can be spent on anything the homeowner wants. Lump sum plans are aimed at homeowners over age 55 who require a larger single cash amount with no potential future monetary requirements.
Voluntary repayment schemes are designed to provide homeowner’s the choice to influence the future balance of their equity release mortgage. They require no proof of income and the ability to make partial payments of upto 10%pa incurring no penalty. Homeowners can therefore control the future balance and how much inheritance they leave.
Equity release schemes can now take health into account. If poor health can be evidenced, lenders will underwrite the risk & potentially offer more favourable terms based on life expectancy. This can be in the form of a higher maximum lump sum, or a lower interest than standard terms offered.