Home reversion is a type of equity release plan, whereby you are able to sell a percentage of your property, or all of it, to a specialist home reversion provider.
In exchange for selling part, or all of your property, you will then either receive regular payments from that provider, or a tax-free lump sum, or even a combination of both.
Generally, you can realistically expect to get around 20%-60% of the current market value of the property (depending on the percentage you opt to sell). This will depend of your age at the time & potentially the health of the youngest applicant.
If you think a home reversion plan might suit your current financial needs, there are several things to consider before signing up with a provider:
Firstly, you’ll need to check the minimum age stated by the lender – some specify that you need to be aged 60/65 as a minimum before you are eligible for a plan of this type.
Secondly, you need to be clear on what percentage of the current market value of your property you will receive. Typically, this percentage will increase with the age you are when you apply, though terms and conditions do differ from provider to provider.
You should also look at what expectations your provider has in terms of the maintenance of the property, and how often it will be inspected. However, these will be clearly explained in the Terms & Conditions within the offer document & highlighted by your appointed solicitor.
You have certain rights under the Equity Release Council Standard, including the right to stay in the property concerned for life, or until you decide you need to move into a care home.
You can also move to a new property, so long as this property is accepted by your provider as being suitable to act as security for your loan. At that point, a re-assessment of borrowing will be undertaken, dependent upon the value of the property you intend on moving to.
This type of product also comes with a ‘no negative equity guarantee’. In simple terms, this means that, at the point your property is sold and all fees (estate agent, solicitors and so forth) have been paid, if the amount of money remaining is not sufficient to repay the balance of the loan, neither you nor your estate will be legally liable to pay the outstanding sum.
Home reversion plans are the ‘original’ equity release scheme. They do provide certainties for your inheritance, which the more popular lifetime mortgages don’t necessarily. Therefore, if you want to pass a guaranteed inheritance to your heirs, a home reversion scheme is definitely worth considering.