Equity Release - Home Reversion Plans

A home reversion scheme allows you to sell part or all of your property to a provider in return for either a lump sum or income and a lifetime right to remain living in your property.  Your home, or the part of it you sell, will then belongs to someone else, but you are allowed to carry on living in it until you die or move out and you or your estate will retain the value of any share not sold.

Whilst under these schemes you sell the ownership, you will still  be responsible for the property and bills relating to it.

You can sell up to 100% of the value of your property but will only receive a heavily discounted sum of money which could be as low as 25% of the current market value at age 65 which is typically the minimum age for home reversion plans.

The home reversion plan provider discounts the amount of cash as compensation for the fact that they will have to wait until you or any surviving joint applicant dies or goes into care before receiving their money back and doesn't charge you any rent in the meantime.  On the sale of the property the home reversion plan company takes their share of the eventual sale price including any growth and the balance goes to you or your estate.

For example, lets say your house is currently worth £250,000.  If you agree to sell 50% (equivalent to £125,000 based on current value) and because of your age you receive 40 percent, you will only receive £50,000. If your house is then sold after 20 years and is then worth £400,000, the lender collects  the applicable value of their 50% share, in this example £200,000.

The percentage you receive for a home reversion plan depends upon your age and sex - the older you are the more you will receive.

Home reversion plan advantages

• No monthly repayments required.
• Your right to remain in your property for life is guaranteed.
• Under a home reversion scheme, the cost of the loan is known at outset (the difference between the amount received and the percentage sold)
• Providing you sell only a percentage of your home (a partial home reversion plan), you are able to guarantee beneficiaries the exact proportion of your property they will receive from your estate.
• A full home reversion plan can quite often release more than a roll up lifetime mortgage - important if you still have a large mortgage which you want to pay off.
• As the percentage sold is set at outset you are less affected by falling house prices than under a lifetime mortgage.
• Unless you sell all of the home, you continue to benefit from any growth in value of the share you retain.
• Unless a full home reversion plan is taken at the outset, you should still be able to sell further percentages whenever required.  This means that you should be able to raise further funds later to either improve your finances further, pay for care or even mitigate Inheritance Tax.  Such further releases cannot be guaranteed under roll up lifetime mortgages as your property may fall in value or the lender changes their criteria.
• If you are liable to inheritance tax, the value of property sold to the reversion company acts as a debt against your estate  and can help reduce any  tax liability.
• You can still move whether you have done a partial of full home reversion plan.

Home reversion plan-disadvantages

• You will not benefit from any house price inflation on any percentage sold.
• Home reversion plans cannot normally be reversed.
• The home reversion plan provider will not offer you full market value as they are allowing you to live in the property for the rest of your life rent free.  The younger you are the more "discount" to market value they will require.
• If you or the last person dies relatively early, the cost of the scheme in terms of equity given up may prove much more costly than under a roll up lifetime mortgage or interest only lifetime mortgage.
• With a home reversion plan, you lose ownership but are still responsible for the upkeep of the property.
• Home reversion plans are generally only available to applicants aged 65 or more.
• Home reversion schemes involve selling all or part of your home and may work out more expensive in the long term than downsizing to a smaller property and may affect your entitlement to State benefits and grants.

How much could you receive?

How much you will receive under a home reversion plans will depend on individual reversion scheme providers assessment of your life expectancy and assessment of your property value.  As such we are unable to give any definite figures, but as impartial equity release advisers, we would be please to obtain quotes from all home reversion plan providers for you.

Home reversion plan advice

If you have any further questions about lifetime mortgages or other equity release schemes or would now like to arrange a free home consultation, call us today for free on 0800 970 4883 or complete our online enquiry form and we will get back to you as soon as possible.

This is a home reversion plan.  To understand the features and risks, ask for a personalised illustration.

Further information about equity release

Clicking on any of the following links will allow you to find out more about key information on releasing equity from your home.

What types of schemes are there | How much can I release | How long does it take | What costs will I incur | How to request a brochure | How to book an appointment