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Home Reversion Plans

Looking into ways to release equity from your home? One of several options available is a home reversion plan.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: June 16, 2022

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

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

We’ll cover the following topics…

What is a home reversion plan?

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

You’ll be given a lifetime lease, allowing you to live in the home until you die or move out. This will often be 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.

Home reversion plans are not usually recommended by experts and financial advisers. This is because other alternatives also allow you to live in your home until you die while accessing your property wealth, without selling the property, which is generally considered preferable.

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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 can be inherited by loved ones
  • 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 plan, meaning that they are ways to access your property wealth as cash without moving out of your home. 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.

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Equity Release Calculator

You can use our equity release calculator to work out how much capital you can release from your home. Simply enter your age and the property’s value and the tool will do the rest.


Estimate if you're unsure
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For joint applications the amount you can release is based on the age of the youngest applicant
years old

Maximum Equity you could release:

The amount is of your homes value, the maximum most borrowers your age can release.

Get Started with an Equity Release Specialist and find out exactly how much you could release.

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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 a little 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, so it’s easier for you 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 simply have short-term cash flow problems, a personal loan or secured loan could be the solution you need.
  • 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.
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Which companies offer home reversion plans?

Because home reversion plans have been overtaken in popularity by lifetime mortgages, there are very few home reversion companies remaining. 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 the laws and standards have slight differences in England and Wales, Scotland and Northern Ireland due to differences in the legal systems.

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’s 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 give you all the information you need. To speak to someone that we’ve vetted and trained for an initial, free, no-obligation chat, simply call 0808 189 2301 or make an enquiry online.

FAQs

Are home reversion plans regulated?

Home reversion plans are regulated by the Financial Conduct Authority. Providers can also opt to become members of the Equity Release Council, an organisation that sets standards and protects equity release customers.

 

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Equity Release Mortgages

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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