If you’re looking to choose between a drawdown and a lump sum lifetime mortgage, you’re in the right place. We arrange lifetime mortgages for homeowners over 55, and two plans at the same rate can behave very differently over 15 years. How you take the money is the first of those differences, and the cheapest one to get right.
Drawdown costs less whenever you don’t need all the money at once. You take a smaller first advance, leave the rest in an agreed reserve, and pay interest only on what you have drawn. A lump sum suits one immediate need, such as clearing an existing mortgage.
A lifetime mortgage is a loan secured against your home, and you keep owning the home. No monthly repayments are needed: the interest is added to the loan and rolls up, so it compounds. The loan is repaid when the last borrower dies or moves into long-term care, normally from the sale of the property.
Plans that meet the Equity Release Council’s standards carry a no negative equity guarantee, so your estate will never owe more than the home is worth. The rate is fixed for life, or variable with a cap that is fixed.
Compounding. At September 2026’s lowest advertised rate of 6.25% MER, a £60,000 release with no repayments grows to about £111,900 after 10 years, £152,800 after 15 and £208,700 after 20. Nothing is being paid down, so the interest earns interest.
Take a lump sum and all of it compounds from the first day. Take drawdown and the reserve you haven’t touched costs nothing. Each later withdrawal is priced at the lender’s rate on the day you take it, so a later drawdown can be cheaper or dearer than the first.
The decision that saves the most, in our experience arranging these, is borrowing the smallest amount that solves the problem and leaving the rest as reserve. It does more than chasing a slightly lower rate. Most people already borrow far less than the maximum: FCA data across 2022 to 2025 puts the median lifetime mortgage at around 15% loan-to-value.
When the need is single and immediate. Clearing an existing mortgage is the clearest case, and some people use a lifetime mortgage to buy their next home, which few realise is possible. If the whole amount will be spent at once, a reserve adds little.
Yes, and this is the second feature that changes the long-term cost. Some plans let you pay part or all of the interest each month, from £50 a month or 25%, 50%, 75% or 100% of the monthly interest, so more of the equity stays in your home.
Since 28 March 2022, every plan meeting Equity Release Council standards has allowed penalty-free partial repayments. How much you can repay differs by lender. Aviva, for example, allows up to 10% of the borrowed amount each year without penalty, from a £50 minimum. Even small repayments slow the compounding curve.
Because the terms vary so much between plans, compare them side by side rather than ranking plans by rate alone; our guide to lifetime mortgages sets out the features each plan can carry.
You can move home, provided the new property meets your lender’s criteria, and the plan moves with you. Repaying in full because you are not buying again can trigger an early repayment charge, unless your plan has downsizing protection. Aviva’s, for instance, starts once the plan is three years old.
Care is covered by the standards. Since 6 May 2025, a permanent move into long-term care waives any early repayment charge on Equity Release Council plans, and that includes care with relatives.
Some plans include inheritance protection, which ringfences a percentage of your home’s value for your family. That share is not available to borrow against, and the rest of the estate still shrinks as the interest rolls up. Equity release will reduce what you leave behind, whichever features you choose.
It can. A standard lifetime mortgage is not underwritten on your health, but enhanced plans can lend more or price lower where health or lifestyle is likely to shorten the plan. Nobody enjoys that conversation. We ask medical questions only with your permission, and disclosing at the start means the right lender is approached first time.
Anyone who can comfortably pay the interest from pension income for life should look at a retirement interest-only mortgage first: it starts from age 50, the debt stays flat, and the affordability test is strict. Anyone ready to move somewhere smaller may find downsizing releases the cash with no loan at all.
Advice is mandatory before any equity release plan goes ahead, and a good adviser will tell you when the answer is not to proceed. Bring your family into the conversation if you can: around half of our reviews were written by a client’s son or daughter. MoneyHelper’s free guide to lifetime mortgages is a sound independent starting point before you speak to anyone.
A lifetime mortgage is a loan secured against your home. It will reduce the value of your estate and may affect your entitlement to means-tested benefits. Ask for a personalised illustration to understand the features and risks of any plan.
Jeremy Furnell is a later life lending specialist at Trusted Equity Release, near March, Cambridgeshire. He is on the FCA register (reference JLF01060) and his firm, Pellucid Ltd, is authorised and regulated by the Financial Conduct Authority, FRN 981845.
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