Home reversion equity release schemes allow you to sell a part of or your entire property to a lender. In return, the home reversion company will provide you with a monthly or lump sum cash amount or a combination of both.
Although the interest is not paid on the loan you take, the home reversion company will take a percentage of the value of your property when it is eventually sold. This percentage will often depend on numerous factors including – your age, the cost of your property and its condition.
The older you are, the more money you will be able to receive. Additionally, should you have a history of poor health then certain home reversion providers can potentially offer you a greater lump sum, or alternatively a lower percentage sale of your property.
How do home reversion equity release schemes work?
With home reversion equity release schemes, you sell part of or the entire property to the lender and become a tenant with a lifetime tenacy guarantee. You will still be responsible for your property, its maintenance and bills. Although you become a tenant, you get the rights to reside in your property with your partner under a lifetime lease. Unlike normal residential tenants, there is no rent to pay for the rest of your life.
The difference between lifetime mortgages and home reversion
Under a lifetime mortgage scheme you retain the complete ownership of your property. On the other hand, with a home reversion scheme you can sell anything up to 100% of your property to the home reversion company.
A major benefit of home reversion schemes is that you can guarantee the percentage of the final sale value of the property at the end of the day. A lifetime mortgage has no guarantee as there is no knowledge of how long the plan will roll-up for, which at the end of the day could result in NO inheritance for the children.
There are also some interest only lifetime mortgage schemes such as the Halifax Retirement Home Plan that enable you to repay the interest but not the capital to the building society or bank. This greatly helps you to calculate how much inheritance will be left as long as the monthly payments are an affordable option.
If you wish to discuss whether a lifetime mortgage or home reversion scheme is right for you contact the Equity Release Supermarket team on 0800 678 5159.