Home Reversions – A brief introduction
A Home Reversion plan is where you sell your home or a percentage of it to a Reversion Company but retain the right to live in it rent-free for the rest of your life.
A Lifetime Lease is granted to you on completion of the Home Reversion plan which is registered at the HM Land Registry. This Lifetime Lease gives you the right to continue living in your property until you or your spouse (if applicable) dies (whoever lives the longest), or you have to move into long term care. As long as you comply with the terms and conditions of the Home Reversion plan, the Reversion Company is unable to sell the property until both you and your spouse have died or you decide to move into long term care. However, even though you are no longer the legal owner of the property you will still be responsible for its upkeep and all associated bills and outgoings relating to it, including arranging buildings insurance on the property.
The money received can either be paid out in a cash lump sum, a monthly income, or a combination of the two.
With a Home Reversion plan you will not receive the full market value for your property as the Reversion Company may have to wait a considerable length of time before they can sell the property and make a profit.
The minimum qualifying age for Home Reversion plans are usually higher than for Lifetime Mortgages.
Interest is not charged with Home Reversion plans. This is because they are not loans or mortgages.
There is no standard Home Reversion plan and therefore policies differ from Reversion Company to Reversion Company.
Home Reversion plans are usually taken out by people over the age of 65 who have no dependents or wish to leave any inheritance.
Disadvantages of a Home Reversion plan
- A Reversion Company will offer you below market value for a share of your home.
- You cannot always move house under a Home Reversion plan and, if you can, you will need the consent of the Reversion Company.
- The house is sold once you move into long term care
- You have to be over 65
- You will be liable for general upkeep of the property and maintaining the buildings insurance cover on the property.
- You no longer benefit from any future house price rises on the proportion of the property that you have sold
- Reversion plans cannot always be reversed as you are selling part of your home. Charges may apply should you be able to end the Home Reversion plan early.
- Your tax position and eligibility for means-tested benefits may be affected
- If you pass away soon after taking out the plan, you may have received little benefit from the Home Reversion plan during your lifetime and sold your property at a discount nonetheless.
Advantages of a Home Reversion plan
- No monthly payments to make
- No interest to pay
- You can typically raise a larger sum from your home with a Home Reversion plan than with a lifetime mortgage
- Generally the older you are, the more money you will be able to release
- The cash you release is tax free and can be spent on whatever you like
- You control what portion of the property is left to your beneficiaries. You are able to guarantee an inheritance.
- You benefit from an increase in property values if you only sell a share in your property.
- More cash can be released than with a Lifetime mortgage
- You can increase the percentage sold at a later date
- The Home Reversion Plans are regulated by the FSA and SHIP.
This is not a product of last resort but one of a number of mainstream options for the over 65s to consider and the borrower is protected throughout. Whether a Home Reversion is suitable for you will be assessed by your Independent Financial Adviser based on your personal and financial circumstances.