Using property to fund your retirement is a relatively new concept, but one that is gaining popularity. Equity release drawdown is one such way to fund additional retirement income needs. If your pension fund isn’t sufficient to cover your outgoings, drawdown equity release can ‘top up’ any additional income.
Equity Release Drawdown allows you to ‘drawdown’ any additional income required from the value of your property. The advantage of this type of equity release plan over a ‘Lifetime Mortgage’ is that you only pay interest on what you’ve taken. With a Lifetime mortgage you may take a large lump sum at the outset, but leave the majority of it in the bank. This loan would accrue interest at a higher rate than you’d probably be receiving from your bank, and eating into your inheritance legacy. A drawdown mortgage is more suitable to needing smaller, more regular withdrawals. A lifetime mortgage is more suited for a one off lump sum.
A Drawdown equity release mortgage provides more flexibility to take income only when needed, saving you unnecessary interest payments. The minimum is usually around £2,000 but this varies between lenders.
With the increase in property values, Equity Release has become a feasible way to top up the income you require in retirement. As this will affect the inheritance your estate will ultimately receive, you should always involve them in any discussions.