Drawdown lifetime mortgages 'becoming more popular'

08-Jan-2008

Drawdown lifetime mortgages are becoming increasingly popular, as over-50s look to make the most of the value tied up in their homes.

That is the message from intune group, a subsidiary of the charity Help the Aged, which provides financial advice for older people.

Drawdown lifetime mortgages allow homeowners to release an agreed portion of the equity in their property in a series of instalments.

According to Mark Gettinby, director of financial services at intune, there are a number of reasons why homeowners would choose to cash in on their homes without selling them.

"The most common reasons are to supplement income, to fund one off purchases such as home improvements or to repay other debts such as mortgages or credit cards in order to increase disposable income," he said.

"More and more clients are taking advantage of drawdown lifetime mortgages."

Selling a portion of the equity in a property is not without risk. The stake in the property that is sold to the bank or building society is still effectively a loan, which means that it accrues interest.

While house price growth will usually ensure that the homeowner retains their equity share, there is no guarantee that house prices will continue to rise.

However, a number of lenders are now members of the industry body, Safe Home Income Plans (Ship), which offers protection against negative equity.


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