What is a Home Reversion Plan?
Unlike a lifetime mortgage and drawdown lifetime mortgage where you remain the homeowner while you live there, with a home reversion plan you actually sell part or all of your property in return for an income or lump sum of tax-free cash whilst still retaining the right to live in it rent free for the rest of your life without having to make any repayments.
With a home reversion plan you don’t necessarily have to sell off all of your property, you may decide to release equity on only a fraction of your home, thus guaranteeing an inheritance to your beneficiaries. Typically home reversion plans aren’t as popular as lifetime mortgages for the reason that many people prefer to retain full ownership of their home.
A key advantage of a home reversion plan is that you are generally able to release larger sums of cash. It’s also worth noting that with a home reversion plan your age is much more significant than with a lifetime mortgage in determining how much money you will receive for the share you exchange - the older you are, the more you will receive. With a home reversion plan you sell the ownership but you are still responsible for maintaining the property and bills relating to it. Other aspects such as your health and property value will also be taken into consideration.
Advantages of a home reversion plan
The advantages of a home reversion plan include:
- Your equity is tax-free and there are no monthly repayments
- A home reversion plan enables you to guarantee an inheritance
- The older you are, the more cash you’ll be able to release
- You benefit from any increase in value of the percentage of the property that you still own
- The cost is known from the start (the percentage sold) compared to lifetime mortgages where it depends on how long you live
- You know in advance how much of the home your family will be left
Disadvantages of a home reversion plan
The disadvantages of a home reversion plan include:
- You’ll receive less than the market value of the share of the -property you sell
- You won’t own all of your home so won’t fully benefit from any increase in value
- A home reversion plan cannot usually be reversed as you are selling part of your home
To find out more about equity release including lifetime mortgages and home reversion plans speak to an independent specialist who can advise you further and research the entire equity release market for you.
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