Equity release plans are financial options offered to people above 55 years old. In most cases, those who cannot access other financial facilities such as loans can decide to sell part or all their property to get a lumpsum or periodic payments as long as they live. Equity release schemes allow the owner to still live in house regardless of the portion of its value from which they have drawn equity.
Drawdown is an equity release scheme that gives you the freedom to withdraw your tax-free cash in periodic payments rather than in lumpsum. This scheme is convenient for people who need the equity release cash for their day-to-day expenses. Once you sign up for drawdown, you are required to state the amount of money you need for your initial withdrawal. The rest of the amount is saved in your cash reserve facility.
How to Get Drawdown
To qualify for this equity release scheme, you need to be above the age of 55. In addition, you are required to own a home. You can visit a drawdown equity release lender to help you asses your qualifications.
The lender begins by calculating the amount you would have in your cash reserve facility. Once this is done, you are asked to state the amount of cash you would like to withdraw before your money is put in a cash reserve facility.
After placing the application, you only need to wait for two weeks before your money is deposited in your bank account. You can then withdraw any amount as you wish, as long as it is not less than £2,000. Once the amount is over, you are required to submit an application in order to have more deposited.
What Makes Drawdown Special
Drawdown equity release scheme differs from other plans in two ways. First, while other equity release schemes have a schedule for how to withdraw money, drawdown allows for people to make flexible withdrawals.
Secondly, while other schemes are set to last throughout the applicant’s life, there is a set time for drawdown.
Why Choose Drawdown?
Drawdown allows you to withdraw your money at any time. This allows you can get the amount you need to cater for urgent needs.
This scheme has a considerably lower interest rate as compared to other lifetime mortgages. Drawdown equity release could help you save money and have enough left for your children or beneficiaries to inherit.
The interest charges for drawdown only apply to the amount of money you withdraw. The cash in your reserve facility in not affected.
With drawdown, you do not have to worry about losing the ownership of your home. You still get to own 100% of all your property. Withdrawals made in form of drawdown do not attract any administrative charges.
You only have to wait two weeks to find the amount remaining the additional drawdown facility in your bank account. Drawdown works faster than other equity release schemes.
Downsides of Drawdown Equity Release
While other equity release schemes are available to you for the rest of your life; or until you are incapacitated, the guarantee for drawdown only sustains you for a stated period of time.
Drawdown money lenders are allowed to take away people’s cash reserve facility if the economy is in bad condition. Therefore, you cannot fully rely on the cash you get from the scheme.
Drawdown equity release interest rates are set with respect to the applicable percentage at that time. The rates may be higher or lower than expected; hence you cannot really know what you may be charged when you make your next withdrawal.
Due to the limit on the maximum cash reserve facility, you cannot always get the amount hope for. When the amount saved in your reserve is over, you have to make another application drawdown application. This may be an inconvenience if you need the money urgently, as you have to wait a while for the entire process to be completed.
Drawdown equity release lenders are allowed to set a limit for the maximum reserve facility. Some lenders may use this freedom to restrict your reserve facility. In this case, you may have to settle for less money than you need.
Drawdown equity release is a greatly beneficial scheme for the retired folk. It offers you the financial freedom you need, and a chance to plan your future as well as that of your heirs and beneficiaries. Applying for drawdown would allow you to continue earning income just as you did while you were working. This, however, is better due to the flexible withdrawal.
Once you have been allowed to get drawdown, you need to be careful with how you manage your account. Be aware of the inconveniences that may come up, such as your reserve facility being withdrawn. It is advisable to make sure you have a separate source of income in case something goes wrong, or if you have an emergency while you are waiting for additional money to be deposited.