With a home reversion plan you sell part or all of your home to a reversion plan company in exchange for a tax-free cash lump sum and a guaranteed lifetime lease with no monthly repayments to meet.
You have the absolute right to stay in your home rent-free for as long as you choose which is why you don’t typically receive full market value for the share of the home you sell.
When the plan comes to an end, the home reversion provider takes its percentage share of the sale proceeds from your property.
Mike and Janet Walsh are both 70 and their property is valued at £180,000. Each month they have enough money to live on but the cost of living has put a strain on any extras they want to have. They discuss it with their daughter who also attends the consultation with their Key adviser and they decide that they can raise the maximum amount by choosing a home reversion plan. They use 50% of the property to get £35,789 whilst the other 50% will be left to their daughter. When Mike and Janet die the house is worth £208,974 and their daughter is left with £104,487.
Advantages of a home reversion plan
- The cash released can be spent on whatever you like.
- You are able to guarantee an inheritance.
- Providing you don’t sell 100% of your property to the reversion company, then if the property increases in value your estate will still benefit from this and so will the percentage of the property that you own.
- The older you are, the more money you will be able to release with a reversion plan.
- You can typically raise a larger sum from your home with a reversion plan than would be available with a lifetime mortgage.
Disadvantages of a home reversion plan
- You will no longer benefit from any future house price rises on the proportion of the property that you have sold.
- The amount you leave as an inheritance will be reduced.
- Your entitlement to means-tested benefits may be affected.
- The home reversion company will buy your home at a discount to its current market value as they are giving you the absolute right to remain in your home for life rent-free.
- If you pass away soon after taking out the plan, you have effectively sold your property on the cheap, however some plans have provisions in place so that you are protected.
- A home reversion plan cannot usually be reversed as you are selling part of your home.
Further information about home reversion plans can be found in our FREE equity release guide. We can post out to you with a complimentary copy of our DVD, which you can peruse at your leisure in the comfort of your home.
Following this, why not book a free no-obligation consultation with one of our dedicated equity release advisers? They will be able to tell you which type of equity release plan will work best for your individual circumstances, or whether it is in fact, right for you at all.
If you are considering equity release as your next financial move, you should read through is it right for you? carefully.
This is a home reversion plan. To understand the features and risks ask for a personalised illustration.