Advice on Home Reversion Plans from the equityRelease Centre

Home Reversion plans are one of the oldest forms of equity release schemes. This type of scheme allows you to sell part or all of your property to a reversion provider in return for either a lump sum or income and a lifetime right to remain living in your property. You can sell up to 100 per cent of the value of your property, but you will only receive a discounted sum of money which could be as low as 25% of the current market value at age 65 rising to approximately 60% at age 91.

There are a variety of Home Reversion Plan providers each offering differing amounts for any given percentage of property sold. For a comparison of Home Reversion plans and other equity release schemes click here.

The provider discounts the amount of cash as compensation for the fact that it may have to wait many years before receiving their money back on your (or in the case of joint applications, -the last persons) death or need to move into care. When the house is eventually sold, the lender receives his percentage of the sale price, and not just the market price at the time the arrangement was agreed.

For example, let's say your house is currently worth £260,000. If you agreed to sell 50% (equivalent to £130,000 based on current value) and because of your age you receive a rate of 40 per cent, you will only receive £52,000. If the house is then sold after 15 years, and is then worth £400,000. The lender collects 50 per cent of this amount, which is £200,000.

The percentage you receive depends upon your age and sex - the older you are the more you will receive. Whilst under these schemes you sell the ownership, you are still responsible for the property and bills relating to it.
If you have retained a percentage of ownership when you (or in the case of joint applicants – the last survivor) die or need to move into care you or your estate receives the full value of the share retained.

When you (or in the case of joint applicants – the last survivor) die the company receives back the value of the percentage sold plus any growth. You or your estate receives any balance you retained, plus growth.

Home Reversion Plans - advantages

• The cost of the loan is known at outset (the percentage sold) . compared to lifetime mortgage type schemes where it depends on how long you live.
• You know in advance how much of the home you will leave to your family.
• Larger sums can be released than under a lifetime mortgage – important if you still have a large mortgage, which you want to pay off.
• Unless you sell all of the home, you continue to benefit from any growth in value of the share you retain.
• Unless the maximum is taken at the outset, you can sell further percentages whenever required – this will not be possible under a lifetime mortgage.
• Relatively simple.
• Likely to use up less equity than mortgage based schemes during periods of low house price increases.
  You can still move.

Disadvantages of Home Reversion Plans

• You receive only a percentage of the market value for the share sold. This is especially marked the younger you are, often making it uneconomical for low value properties.
• If you or the last person dies relatively early, the cost of the scheme in terms of equity given up may prove more costly than under a lifetime mortgage
• You lose ownership but are still responsible for the upkeep of the property.
• You loose the rights over the property and become in effect a tenant although no rent will be due.
• It is more difficult and may even be impossible to buy back any share sold or for your family to be able to buy it.
• Home Reversion Plans are available from several different providers but details and terms vary. Apart from the amounts each company deducts converting your share into money, some schemes allow you to benefit from increase in property values while others do not. Some schemes will allow you to sell 100% of your properties, while others limit it to only 90%.
• Home Reversion Plans 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.

If you would like further advice on Home Reversion Plans or equity release generally, please complete our equity release enquiry form and one of our trained consultants will call you back just as soon as possible.  Alternatively please feel free to phone The equityRelease Centre on 0118 958 8810.

You will always receive courteous service in the strictest confidence from highly trained staff who all value your custom. Your business will be dealt with in a friendly, efficient and personal manner at all times.

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