Home reversion plan

A home reversion plan lets you sell all or a percentage of your home in return for a cash lump sum. You can stay living there rent free until you pass away or go into permanent care.

What is a home reversion plan?

You sell all or a share of your home to a home reversion provider in return for cash (either as a lump sum or income). You’ll get a ‘lifetime lease’ – a promise that you can stay in your home until you pass away or move into long-term care.

You could sell up to 100% of your home but you wouldn’t get 100% of the current market value for it because reversion providers only pay a discounted rate. The older you are, the higher the percentage – as a guide if you’re 65 it could be as little as 25% of your home’s market value, rising to around 60% if you’re 90. This might vary from provider to provider.

The minimum age at which you can take out a home reversion plan is usually 60 but some home reversion providers insist you’re at least 65 before you can apply.

When the plan comes to an end – when you pass away or move into care – your home will be sold. Your beneficiaries get your share of the proceeds from the sale of your home.

If you are considering a home reversion plan you should get specialist advice from an adviser who can help you to explore this and other later life lending options.

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Home reversion plan versus lifetime mortgage

The major difference is that with a home reversion plan you no longer own all of your home, whereas with a lifetime mortgage your home remains yours. Despite their fall in popularity they do offer some benefits:

  • Guarantee an inheritance – you’ll know exactly what proportion of your home’s value will be left to your family. Some lifetime mortgages now enable you to do this too
  • Benefit from house price rises – on the percentage you still own (if any)
  • Protect against falling prices – as you’ve already sold part or all of your home, if house prices fall it won’t impact you or your estate on the proportion sold
  • Inheritance tax planning – a home reversion plan removes that percentage of the home value from your estate in terms of inheritance tax

Both types of equity release give you tax-free cash to spend in retirement. And they both enable you to stay in your home for as long as you wish.

Frequently asked questions about home reversion plans

Are home reversion plans regulated?

The Financial Conduct Authority (FCA), regulates home reversion plans. This means that firms advising on or selling these products have to meet certain standards and provide clear complaints and compensation procedures.

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Can you sell your house and still live in it?

A home reversion plan lets you sell all or part of your home in return for cash in retirement. The plan will come with a ‘lifetime lease’ which means you can and stay living there rent-free until you pass away or move into long-term care.

Find out if it’s right for you

Is home reversion different than equity release?

A home reversion plan is a type of equity release – it lets you release the equity built up in your home without having to move. It is less popular than a lifetime mortgage (the other type of equity release) as it involves you selling your home.

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Is a home reversion plan the right option for you?

Home reversion plans can be a useful way of releasing equity from your home. However, there are some important ‘Things to think about‘. They could have major implications for tax, benefits, inheritance and your long-term financial planning.

Our friendly advisers can help you to explore home reversion plans – and the alternatives – without it costing you a penny. Only if you decide to go ahead we charge an advice fee of £995, payable on completion.

Your adviser will be able to explain how:

  • You will no longer own your home (or only own part of it). This means you will not benefit from any increases in house prices and the value of your estate will be reduced.
  • You cannot change your mind in the future – once the plan is in place you cannot sell your home.
  • You will only receive a discounted rate for your home (or the part that you sell) not the full market value.
  • The amount you can borrow is a percentage of your home’s value based on your age, rather than affordability. If you want to access more of your equity, there are other mortgage options you could explore.
  • You will still have to maintain the home while you live in it, so you might need to set aside money to do this.
  • You’ll have to follow the terms of the ‘lifetime lease’ and you could still be liable for other costs such as ground rent (or chief rent) no matter what proportion of your home has been sold. If this could be a problem, then a home reversion might not be suitable for you. It is essential you appoint your own solicitor to check the lease and give you advice.
  • Home reversions are usually better suited to older people, perhaps over 70 or 75.
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Other types of equity release

If you are looking for a cash boost in retirement and don’t want to sell your home, then you could consider one of these lifetime mortgages instead.

Roll-up lifetime mortgage

A roll-up lifetime mortgage (also called a lump sum lifetime mortgage) enables you to take a lump sum of tax-free cash and typically no repayments are made. This means the interest is added to the loan amount and the balance grows (compounds) over time.

Roll-up lifetime mortgage

Drawdown lifetime mortgage

A drawdown lifetime mortgage enables you to take cash from your home in chunks, as and when you need it. Interest is only charged on the cash which you have drawn down, meaning this can be a cost-effective way of borrowing.

Drawdown lifetime mortgage

Interest only lifetime mortgage

An interest only lifetime mortgage is a relatively new kind of equity release plan where you can pay the interest due on a monthly basis. This means the size of your loan never goes up, making them an increasingly popular option for over-55s.

Interest only lifetime mortgage