Home reversion plans
This type of scheme allows you to sell part or all of your property to a provider in return for either a lump sum or a regular income.
You still retain the right to live in your property for the rest of your life. You can sell up to 100 per cent of the value of your property, but you will only receive a heavily discounted sum of money which could be as low as 25% per cent of the current market value at age 65 rising to, typically, 60% at 91 years of age.
These schemes used to be very popular, but more people now opt for a lifetime mortgage.
How do these schemes work?
Let’s look at an example. If your house was worth £200,000 and you agreed to sell 50%. In other words, the equivalent of £100,000 based on the current value of your home. Now, suppose you are 65 and offered 25%. That means you would receive £25,000. However, if the house is sold 10 years later and is worth £300,000 the lender would receive 50% of the amount. In other words, £150,000. That still means you have the other 50% to do with as you wish.
Advantages of home reversion plans
Some of the key advantages of home reversion plans are as follows:
- You know what proportion of your home will be left to your estate on your death.
- You may receive more money than under a lifetime mortgage.
- If house prices fall there is less impact than if you had taken a lifetime mortgage where interest would continue to build up (whatever happens to the price of your property).
- You continue to enjoy the benefit of house price increases on the part of your home you still own (unless you sell all of it).
If you‘re not sure which product might be right for you, take a look at this comparison.