Home Reversion Plans & Schemes

Home reversion plans were once the only equity release option for people looking to access their property wealth in cash. Now that there are other, more flexible options, they are declining in popularity, but some providers still offer them.

If you’re considering home reversion, we’ll explain how it works, why it’s no longer as popular, and your other options.

What is a home reversion plan?

It’s a type of equity release that allows you to sell your home while you remain living in it. You can sell the whole property to a specialist equity release provider (a full reversion) or just part of it (a part reversion) for either a cash lump sum, regular payments, or a combination of the two.

You’ll be given a lifetime lease to live in the home until you die or move out. This lease is often rent-free, though some plans involve paying monthly rent.

The amount you’ll receive is usually between 30% and 60% of the market value of your home. The older you are, the higher your offer will be. You might also receive a higher offer if you have certain life-limiting health conditions.

Experts and financial advisers do not usually recommend home reversion plans. Other alternatives, which allow you to live in your home until you die while accessing your property wealth without selling it, are generally considered preferable.

Eligibility criteria

Home reversion eligibility is typically based on the following criteria:

• The minimum age for a home reversion plan is 60
• Your home must be worth at least £80,000, or more, depending on your provider
• The property must be in good enough condition for the provider to later sell it
• If your property is leasehold, your provider may require that 80 years or more remain on the lease
• There must be no mortgages or loans secured on the property (or, if there are, you may be required to repay them from the cash you receive)

Benefits and drawbacks of home Reversion

The main benefits of home reversion are:

• You’re able to stay in your current home
• The money you receive is tax-free
• If you sell only part of your home, the share left to loved ones is protected

However, you should carefully consider the following downsides of home reversion plans:

• Though you can stay in your home, you will no longer own it (or will only own part of it)
• Therefore, you will reduce the value of your estate that loved ones can inherit
• The cash you’ll receive will be far less than the market value of the property
• If you change your mind, you’ll have to buy back your home at full market value, which will be extremely costly
• You’ll need permission from the home reversion provider if you wish anyone else to move into the property once they own it
• You will still be responsible for the cost of maintaining the property
• You may also be responsible for other costs, such as ground rent and service charges
• There are other costs involved, including an arrangement fee, valuation fee, and legal fees
• Receiving a cash lump sum can impact any means-tested benefits you receive, such as pension credit

Alternatives

There are numerous other ways to raise cash to cover your living costs in retirement.

Lifetime mortgages

Home reversion plans and lifetime mortgages are both types of equity release plans, meaning that they allow you to access your property wealth as cash without moving out of your home. However, lifetime mortgages are now far more popular due to one important difference.

While home reversion plans require you to sell your home, lifetime mortgages allow you to retain ownership of it throughout your lifetime. You can access a similar amount of cash, which you’ll receive in the form of a loan, which only needs to be repaid after you die or move into long-term care, usually by selling the home.

Find out how much you could borrow on a lifetime mortgage by using our equity release calculator below.

Retirement interest-only mortgages

If you have retired, you might have difficulty getting a conventional residential mortgage, but a retirement interest-only (RIO) mortgage could still be an option. These are designed for older borrowers and are slightly easier to qualify for.

Because it’s an interest-only mortgage, you will only need to repay the interest on the loan, not the capital. This keeps your repayments lower, making it easier to prove you can afford them.

The capital of the loan will need to be repaid when your property is sold (usually after you’ve died or moved into long-term care).

Other options

The other options available to you will depend on your financial situation, but could include:

• Remortgaging: If you currently have a mortgage, you may be able to increase your borrowing, either with your current lender or a new one (subject to an affordability assessment).
• Downsizing: You can sell your home and move into a cheaper one, which will leave you with an excess of cash from the sale.
• Renting out your property: You could let your home to tenants, while you move out and rent a cheaper property. This could allow you to retain ownership of the home while using it to cover your living costs.
• Taking out a loan: If you have short-term cash flow problems, a personal loan or secured loan could be your solution.
• Selling other assets: You might have something else of value that you can sell or other investments you can cash in.
• Pension drawdown: If you have savings in a pension, you can speak to a financial adviser about ways of accessing them.

Which companies offer home reversion plans?

Because home reversion plans have been overtaken in popularity by lifetime mortgages, very few home reversion companies remain. Some only offer services to existing customers and no longer offer new plans.

You cannot apply for a home reversion plan without speaking to an adviser. Though home reversion companies can connect you with an adviser, they would only be able to recommend products from that company and could not discuss your other options and alternatives. So, it’s best to first speak to an independent specialist.

Is home reversion any different outside of England?

Home reversion plans are available across the UK, but due to differences in the legal systems, the laws and standards in England and Wales, Scotland, and Northern Ireland are slightly different.

So, not all home reversion plan providers cover Scotland, and most local equity release specialists would recommend lifetime mortgages here.

Home reversion plans are available in the Republic of Ireland to people aged over 55 with a property worth over €120,000. Due to low popularity, there are even fewer providers in Ireland than in the UK.

Speak to an equity release specialist

Before committing to home reversion, it is crucial to speak to an expert who can advise you on whether it’s the best option for your circumstances. This decision will affect your finances for the rest of your life and is very difficult and expensive to reverse.

We work with numerous equity release specialists who can provide you with all the information you need. To speak to someone we’ve vetted and trained for an initial, free, no-obligation chat, simply call 0330 818 7026 or make an enquiry online.