Home Reversion

A Home Reversion plan is a type of equity release where you sell all or part of your property to the reversion company in exchange for a cash lump sum, regular income, or both.

This type of equity release can help supplement your later life income, fund home improvements, or to help a family member with their financial future.

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We operate to the highest standards and will always explore other financial options available first before proceeding with an equity release plan. We will only arrange a mortgage if we are completely happy that it meets your best interests. If it’s not suitable for you, we will say so.

How does Home Reversion work?

Home Reversion involves selling a percentage of your home’s equity to a specialist reversion lender. In exchange, you receive a lump sum, regular payments, or a combination of both, depending on the terms of the agreement.

The value of the percentage you sell is typically less than the current market value. This is because the reversion company gives you the right to live in your home rent free for the rest of your life. Therefore, the lender will not receive any return on their investment until the property is sold, which may be many years in the future.

The value of the equity in your home is determined by factors such as your age and state of health, the condition of your home and the percentage of the equity you wish to sell.

When is a Home Reversion plan repaid?

Home Reversion is repaid when the property is sold. This usually happens once the last borrower dies or moves into long-term care. Although less common, repayment can be made if you decide to sell your home, but this might require early settlement fees depending on the terms specified in your agreement.

It is advisable to retain a percentage of the equity in the property. This way, when the home is eventually sold, your beneficiaries or estate will receive a share of the remaining equity.

The lender will receive the agreed percentage of the sale value. As an example, if you sold a 50% share of your home, the reversion company receives 50% of the proceeds when it’s sold.

Is Home Reversion right for you?

To be eligible for equity release through a Home Reversion scheme:

You (and your partner, where relevant) must be aged 65 or over.

You must own (or be buying) your own home.

Home Reversion pros and cons

Pros

You will have a substantial tax-free lump sum or regular income to spend as you wish.
You don’t have to make a monthly repayment.
You will not build up any debt.
Beneficiaries know the proportion of your home (if not the value) that they will receive from your estate.
Unless you have sold 100% of your property, you continue to share in the rise in value of your property.
You can take further cash depending on the amount you originally sold.
You can usually draw more from a Home Reversion scheme than a Lifetime Mortgage.
It is usually possible to draw higher amounts if you are in ill health.

Cons

It will reduce the value of your estate and therefore the amount left to your beneficiaries.
If you die soon after starting the plan, you may have sold your house (or a share of it) for less than the market value without realising the benefits. Some schemes may give a rebate if death occurs within the first few years of the start date.
Some schemes can take a long time to arrange, and some lenders are very selective about the properties they consider.

What our clients say

“My mother’s solicitor referred me to 55Plus. Our adviser arranged to meet with my mother and I in her home and spent considerable time explaining all the various options in detail, ensuring that we both fully understood the detail and commitment of each type of mortgage available. The adviser was extremely thorough in checking my mother’s particular circumstances before arriving at a recommendation, which exactly fitted her requirements.

This was a big step for my mother, but our adviser was very patient in their approach, and at all times took care to ensure Mum didn’t feel pressurised, but that she felt happy to proceed. They also took time to explain ancillary issues such as the effect on beneficiaries and explored the possible effect on other state benefits which Mum receives.

I would confidently recommend 55Plus to others in similar circumstances who would require a clarity of approach with a friendly, pleasant manner.”

D Williams

Wales

Your questions answered

Do I have to pay interest on a Home Reversion scheme?

No, there are no interest payments on the money you receive from a Home Reversion scheme – you sell a proportion of your home for a tax-free lump sum or monthly income.

Are Home Reversion schemes regulated?

Home Reversion lenders are regulated by the Financial Conduct Authority.In addition, you are protected by the Equity Release Council’s No Negative Equity Guarantee, which means that if your home sells for less than the amount owed, your estate will not be responsible for the difference.

Are all Home Reversion schemes approved by the Equity Release Council?

We endeavour to work with lenders who are approved by the Equity Release Council. Where this is not possible, we will advise you accordingly.

What inheritance will I leave my beneficiaries with a Home Reversion scheme?

The inheritance available to your beneficiaries links directly to the percentage of the equity sold. Therefore, if you sold a 50% share of your home, the reversion company receives 50% of the proceeds when it’s sold, with the remaining 50% available for your beneficiaries.

Can I still move house if I take out a Home Reversion scheme?

Yes. However, there will be stipulations about the property you move to. For example, it must be of similar value and an acceptable construction type for the lender to approve it.

Can I repay a Home Reversion loan without selling the property?

Yes. However, it is important to understand that when you buy back the percentage you had originally sold, you will have to pay the current market value. Depending on the property market at that time, this could be more or less than you sold the equity for.

It is much more common for the Home Reversion loan to be repaid when the property is sold.

Who pays for the ongoing maintenance of the property?

You are responsible for all ongoing maintenance and upkeep of your home, as well as insuring it. This is because the lender gives you the right to live in the property rent-free.