What is Home Reversion?

As mentioned earlier, home reversion is a financial arrangement where you sell a portion or all of your home to a provider, typically in return for a lump sum or regular payments. 

Though the provider now owns the part of the home you’ve sold, you retain the right to live in it rent-free for the rest of your life. 

This allows you to benefit from the value of your home without having to move. But it does mean you’ll no longer fully own the property. It’s a way to access funds tied up in your home, while still having a place to live.

How Does Home Reversion Work?

Home reversion might seem complex, but it can be broken down into simple steps. Here’s how you can understand it:

  1. Choose a Plan – You pick either a full or partial home reversion plan with a provider.
  2. Value Your Home – A valuation is done to determine your home’s worth.
  3. Agree on Terms Below Market Value – You and the provider agree on the percentage to sell and the amount you’ll receive, typically below market value.
  4. Receive Payment – You receive a lump sum or regular payments, tax-free, with no interest payable.
  5. Live Rent-Free with Lifetime Tenure – You can stay in your home for life without paying rent, or until you move into permanent care.

Full Reversion Example

If your home is worth £200,000, and you opt for a full reversion, you sell 100% of your home and get a lump sum, e.g., £100,000.

Upon your passing or moving to long-term care, the home may be sold, and the provider recovers the sale profits. Your beneficiaries will no longer have a legal claim to the property.

Partial Reversion Example

If you sell only 50% of your home, worth £200,000, you might receive £50,000. 

But if the property is sold for £400,000 when you pass away, the provider will get 50% of the sale price, while your beneficiaries will receive the balance due to your estate.

Who is Eligible for Home Reversion Plan?

General Eligibility Criteria

Wondering if you qualify for a home reversion plan? Here’s what you’ll typically need to look at:

  • You should be over 65 years old.
  • Your home should be worth £80,000 or more.
  •  A maximum of two people can be listed on the title deed of your property.
  • Some providers may limit their services to specific areas within England, excluding places like The Channel Islands and The Isle of Man.

Special Considerations

Some circumstances may require special attention:

  • If you’re younger than 65, other options might be more suitable, such as lifetime mortgages or other loan types.
  • Having health issues might enable you to access a larger portion of your home’s value.
  • Some providers might not accept non-standard properties.

If your situation doesn’t fit neatly into these criteria, a good specialist broker could help find a solution for you. You can take time to fill out this quick form, and we’ll arrange for a specialist to contact you directly, for free, no obligation attached.

The Pros and Cons of a Home Reversion Plan

Home reversion plans aren’t just about selling your home. They come with several benefits and drawbacks that you should consider:

Pros

Guaranteeing an Inheritance. You can protect a percentage of your property’s value for your heirs.
Tax-Free Lump Sum. The money you receive is tax-free.
No Monthly Repayments. There are no ongoing repayments to worry about.
Flexibility to Move. You can still move home under certain conditions.
Protection Against Falling Prices. If the property value falls, it’s the provider’s risk, not yours.
Inheritance Tax Planning. It can be a tool for managing your inheritance tax liabilities.

Cons

Possible Expenses in Reversing. If you change your mind, there may be costs to reverse the process.  You’ll need to buy back the share at current market prices, possibly paying significantly more than when you sold it.
Family Inheritance Concerns. Selling part or all of your home may affect what you leave for family members.
Missing Future House Price Increases. You’ll miss out on future price increases on the part you’ve sold, especially since it was sold below market value.
Reduced Inheritance. The money you receive may be lower than what your property could fetch in the future. If you sell 100% of your property, your beneficiaries will be left with nothing to inherit.
Loss of Ownership. You’ll no longer own part or all of your home.
Age Restrictions. Home reversion plans have age limits, usually starting from 65.

Alternatives to Home Reversion Plans

Home reversion plans aren’t the sole way to tap into your property wealth. Here are diverse options you might consider:

Lifetime Mortgages

Unlike home reversion, lifetime mortgages don’t require you to sell your property. You can borrow against your home’s value and keep ownership. 

The loan is repaid once the property is sold after you die or move into long-term care. Find out how much you could borrow using our equity release calculator below. (Placement: After this section)

Retirement Interest Only Mortgages

Specifically designed for retirees, these mortgages only require you to repay the interest. The capital is paid when your property is sold, typically after you’ve passed away or moved into long-term care.

Downsizing

If a smaller place suits you, selling your current home for a less expensive one can free up cash.

Remortgaging

You may increase your borrowing with your current lender or find a new one, subject to an affordability assessment.

Renting Out Your Property

This option lets you retain ownership while renting somewhere cheaper, using your property to cover living costs.

Taking Out a Loan

A personal or secured loan could solve short-term cash flow problems.

[Image suggestion: Icons or infographics representing each alternative. Lifetime Mortgages: An icon of a house with a lock symbol to depict ownership and a clock to represent the lifetime aspect.

Retirement Interest Only Mortgages: An icon of a house with an interest percentage symbol.

Downsizing: An icon of two houses, with one being smaller than the other.

Remortgaging: An icon of a hand holding a house with an arrow indicating a switch.

Renting Out Your Property: An icon of a house with a rental tag.

Taking Out a Loan: An icon of a hand holding money or a banknote with a loan contract.

(Placement: Next to each alternative) Alt Text for the image: “Icons representing various alternatives to home reversion plans, including lifetime mortgages, retirement interest-only mortgages, downsizing, remortgaging, renting out your property, and taking out a loan. Caption for the image: “Explore Your Options: Alternatives to Home Reversion Plans.”]

These alternatives provide various benefits to meet different financial needs. Whether retaining ownership or seeking short-term solutions, you have choices beyond home reversion plans.

Key Takeaways

  • You must be over 65 years old, and the property value must be £80,000 or more.
  • You can sell part or all of your home to a provider while retaining the right to live in it rent-free.
  • Consider the potential impact on family inheritance and weigh other alternatives such as lifetime mortgages or downsizing.

The Bottom Line: Speak with an Equity Release Advisor

Home reversion schemes offer an attractive solution for those over 65 to capitalise on their property without having to move. 

The plan’s ability to provide a tax-free lump sum or regular payments, along with lifelong tenure, can add substantial ease to retirement living. But it’s essential to understand the process, the eligibility criteria, and the possible impact on family inheritance.

With a home reversion plan, you can sell part or all of your home while living in it rent-free. This could provide the financial flexibility you’ve been seeking in retirement. But, it’s essential to understand that your situation is unique. And professional guidance can make a difference.

A specialist equity release broker can provide tailored guidance, clarifying the pros, cons, and eligibility criteria tailored to your unique situation. They’ll help you navigate this significant decision without pressure.

If you’re ready to explore your options, simply fill out this quick form, and we’ll match you with an experienced mortgage broker.