Equity Release Schemes - Home Reversion
Home reversion plans involve selling part, or all of the value in your property for cash.
This tax free cash is available as a lump sum, income or a combination of both. In
return, the reversion company provides a lifetime tenancy agreement for the part
they own. Any amount upto 100% of the property can be sold. A major benefit of
home reversion schemes is they guarantee a fixed inheritance to the beneficiaries.
Main Features of Home Reversion Plans UK
Home reversion schemes commence at a later age than a lifetime mortgage. The minimum age is 65 and
the older the applicants are, the better the terms offered by the home reversion providers. Where part of
the property remains unsold, any escalation in the value will still be retained by the applicant. Additionally,
onus for the upkeep & maintenance of the house lies with the applicant, including the costs thereof.
How much is exchanged for selling part of the property?
The basis of this calculation is down to age, sex and property valuation. The amount exchanged by the
reversion company is heavily discounted due to the fact you will be living in their part of the property rent
free, for the rest of your life. Therefore, the younger you are, the less you will receive. For instance, if a
male age 65, sold 100% of his property, he is only likely receive around 35% as a tax free lump sum.
Why should you choose a home reversion?
Popularity of home reversion plans has declined over recent years. Currently, only 2% of equity release sales
are completed on a home reversion basis. Some people feel uncomfortable with the fact they do not own
100% of their property. Additionally, should death occur in the earlier years, reversion schemes can prove to
be an expensive way to release cash. However, some home reversion schemes do offer an early vacancy
option which provides a guaranteed minimum payment if you die or leave the property in the first five years.
Advantages of home reversion schemes
- You can guarantee an inheritance by selling only a proportion of your home
- Home reversion plans usually offer higher lump sums than their lifetime mortgage equivalent
- No monthly payments are required & no interest is charged by the home reversion company
- Home reversion schemes are favourable when the housing market is stagnant, or declining
- Application fees are lower with a home reversion than a lifetime mortgage roll-up plan
- If the full percentage has not been sold, then future sales of reversion equity are possible
Disadvantages of home reversion schemes
- The minimum age for home reversion is 65, which is higher than normal equity release schemes
- You will not receive full market value of the property as it is sold at a discount
- Guaranteed inheritance is now available as an option on lifetime mortgage plans
- They represent poor value for money should house prices rise significantly in the future
- If you die in the earlier years, you have given up a large equity stake in your home for little return
- You lose 100% ownership of the house & for some people this creates uneasiness
- You will not benefit from house price escalation on the proportion of the property you sold
Additional research on home reversion plans
Further advice regarding home reversion plans can be provided by appointment in the comfort of your home
or if easier by telephone. Our experienced equity release advisers who can provide friendly impartial advice.
Your initial meeting is free of charge & without any obligation. This will involve discussing your current & future
financial needs, enabling your local equity release adviser to source the best equity release schemes for you.
All advice provided is completely independent as we have access to the whole of the lifetime mortgage market.
Call us today on 0800 678 5169 or request a call back by leaving us your contact details.
Equity Release schemes may reduce the value of your estate.
To understand the features and risks always ask for a personalised illustration.
Equity release UK may not be suitable for everyone and may affect your entitlement to state benefits.