What is a home reversion?
A home reversion plan is a type of equity release scheme where part or all of the homeowners’ property is sold to the plan provider, in exchange for a tax-free lump sum. You’ll also receive a lifetime lease, which allows you to remain at the property for as long as you live or until you move into long-term care.
As you get to stay in your home, the provider of your home reversion equity release plan will usually pay less than the true full market value of your home. How much you receive will depend on factors such as your age and property value.
There is no interest charged and the percentage that’s sold remains fixed until the end of the home reversion plan agreement. At this point, which is usually when the last homeowner has passed away or moved into permanent care, the property will be sold and the proceeds split with the lender taking their percentage share. Any remaining funds will be left to you or your estate.
What are the benefits and drawbacks of a home reversion?
Some of the benefits of these schemes include:
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You can stay in your own home for the rest of your life, or until you move into permanent care
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There’s no interest to pay because the scheme is not a loan
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You’ll benefit from any increases in the value of your property on any unsold percentage
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You can protect a portion of your property for inheritance, providing you do not sell 100% of your home.
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Releasing equity from your home is tax-free
Drawbacks
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You will receive less than the market value when selling your property to the home reversion provider
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It is costly to cancel the plan early as you would need to buy back your property at the full market value
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You won't be the legal owner of the property
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A home reversion plan will reduce your financial options in the future.
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Dependent on the percentage of your property you sell, you may be left with limited or no property equity remaining.
What are the costs of setting up a home reversion plan?
Making sure you’re happy with all the terms of your home reversion plan, or any equity release scheme, is crucial. Your solicitor will then go through the details with you and ensure you are aware of the terms and implications of the plan. Only then should you sign on the dotted line.
As part of your equity release home reversion plan, you will become a beneficial owner and no longer the legal owner, but you’ll still have to make sure your home is properly maintained. It’s always a good idea to have a pot of money set aside for any repairs or ongoing maintenance. It’s also important to note, that you will not be able to make any major changes to the property without permission from the scheme provider.
Depending on the provider you're recommended, here are some of the costs that could be incurred:
Come to the experts for your home reversion plan
Remember, you must get advice before you take out any equity release product. If you want to do some more of your own reading, our equity release guide is free to download and can provide you with more information.
So, if you’re ready to start exploring your options, our friendly and experienced team can be reached via our quick contact form or on 0800 188 4812.
Unless you decide to go ahead, our service is completely free of charge as our fixed advice fee of £1,799 is only be payable on completion of a plan.
