Home reversion plans
What is a home reversion plan, how does a home reversion plan work?
We don't offer home reversion plans, but here's a quick guide to what you need to think about if you are considering buying one.
What is a home reversion plan?
A home reversion plan is a way to sell all or part of your home, and in return, be given a tax-free cash lump sum or regular income, and a lifetime lease. This is basically a promise that you can stay in your home until you die or go into long-term care.
When you die or move into long-term care your home is then sold and you or your estate receive back your share of the sale proceeds, minus the share sold to the reversion provider. For example, if you sold 25% of your property to the reversion company, on the sale of your home they would receive 25% of the proceeds, including any growth in the property's value.
How much of my home could I sell?
You could sell up to 100% of the value of your property, but you won't get 100% of the current market value for it.
How much can I release?
It all depends on your circumstances. This isn't a figure that's calculated easily, because your age and personal circumstances come into the equation.
It could be as little as 25% of the current market value, if you're as young as 65 (and may therefore live in the property for many years), or it could be up to about 60% if you're 90 – and less likely, relatively speaking, to live there for very long.
Are there limits on who can buy a home reversion plan?
As a general rule, you have to be:
- aged 65 and over
- a homeowner, and
- a UK resident.
In most cases your property must also be:
- in England, Scotland or Wales
- your main residence
- worth a minimum of £120,000, and
- made of standard construction.
What are the advantages of a home reversion plan?
- You’ll know what proportion of your home’s value would be left to your estate when you die.
- You may get more money from this type of product than you would from a lifetime mortgage.
- If house prices fall then there’s likely to be less impact for you than you’d experience with a lifetime mortgage (where interest carries on building up over time).
- You’ll benefit from any house price increases on the part of your home you still own (unless you sell all of it).
- You’ll still own a percentage of the property, and that can be passed on to your beneficiaries when you die (unless you sell all of it).
What are the disadvantages of a home reversion plan?
- If you choose to buy back the share of the property you sold to the provider, you'd have to do so at the current full market value.
- You won't see any benefits from future house price growth on the part of your home that's been sold.
- Usually you can't take out a home reversion plan until you are (or your partner is) 65, whereas lifetime mortgages are available from 55.
- If you die sooner than expected (or intend to sell your property shortly after taking the home reversion plan out), you could lose out as you would have sold all, or part, of your home at a reduced value.
Is there anything else I should know?
We recommend talking to a professional adviser before making any decisions about buying equity release products.