Home reversion plans
Home reversion plans allow you to release an amount of money by selling all or part of your home to the reversion provider.
You will receive a cash amount to spend on whatever you want, although ownership of your property is transferred to the reversion provider, you will have the right to live in your home for as long as you like rent–free.
When Home Reversion plans end, which is usually when you die or if you go into long–term care, the reversion provider will sell the property and receive the total sale price. They will then take their percentage share of the sale price and pay any balance to you or your estate.
Therefore, if you sell less than 100%, you may be able to guarantee an inheritance for your family from the sale of the property.
The benefits of a home reversion plan
- You receive a larger cash lump sum to spend on whatever you want.
- You can continue to live in your home rent–free until you die or go into long–term care.
- A home reversion plan is portable so you can still move if you want to, as long as your new home meets the eligibility conditions at the time.
- Some providers offer an ‘inheritance protection guarantee’, you can make sure there will be a minimum payment to you or your estate if you die or need to move into long–term care in the early years of the plan.
- Others offer ‘house price inflation guarantee’, this means you will receive a payment if your property value increases above a certain level over the term of the plan when you die or move into long–term care.
- You can sell a small percentage and then sell further chunks of your equity over time.
Things to think about
- The money from the home reversion plan is provided upfront and you will continue to live in your home rent–free, you will get less than the full market value of the share of the property that you sell to the reversion provider.
- Although you remain living in your home, you have to transfer the legal title of your property to reversion provider.
- Receiving a cash lump sum from the plan will reduce the value in your home and the amount of any inheritance you will leave.
- You don’t have to pay tax on the amount you receive, but it may affect your entitlement to tax and means–tested benefits, this will be checked by your advisor.
- A home reversion plan is a long–term commitment – it can be expensive to buy back the share of your property in the future as you will have to pay the full market value.
Why choose this option?
- You want or need a large lump sum of money
- Ensure there will be an inheritance guaranteed
- The ability to sell further equity shares later in return for further funds
- Your circumstances may change, this offers flexibility if you do not sell 100% initially
- No interest repayments.
- Couples who wish to make sure their spouses are catered for financially.
The list is endless