Home Reversion or Lifetime Mortgage

Home Reversion or Lifetime Mortgage

Home reversion or lifetime mortgage are the two main forms of equity release sought by mature individuals within the UK. Equity release mortgages are ideal for individuals who are looking to increase their income or capital, as it allows borrowers to receive cash by securing a loan against the value of their home. There are two forms of equity release available to individuals in the UK, which come in the form of a home reversion or lifetime mortgage. Our team of expert advisers will evaluate whether a home reversion or lifetime mortgage would be suitable for each client.

Home reversion or lifetime mortgage arrangements can only be terminated at the occurrence of the borrower’s death, or if they borrower occupies permanent residency at a care institution. Lifetime mortgage plans require the borrower to repay the initial amount of cash loaned by the provider, including additional interest. A lifetime mortgage plan is available in three forms; interest only schemes, interest roll up schemes, or home income schemes.

An interest only lifetime mortgage scheme does not demand the mortgage repayment by the borrower until the agreement comes to a close, yet monthly payments of interest must be supplied to the provider. Interest roll up schemes differ from interest only schemes, as the borrower does not need to make any interest payment during the duration of the arrangement. Instead, interest is calculated during monthly intervals and attached to the mortgage debt. Home income plans enable the borrower to purchase an annuity with their newly found capital, which may be used to repay monthly breakdowns of mortgage and interest.

Beneficial features of lifetime mortgage equity releases include retaining ownership of the property and enabling them to leave equity within the property for beneficiaries to profit from. However, if interest rates are free to vary, there is a possibility that interest will ascend significantly, resulting in escalation of the overall debt. Our team of specialist advisers are equipped with detailed information on each home reversion or lifetime mortgage scheme, and will also suggest a suitable option on the basis of each client’s requirements.

A home reversion is another form of equity release; however the provider is entitled to a share in the borrower’s property, rather than being able to seek full repayment of the mortgage from the borrower. The borrower does not need to issue any form of payment to the provider during the term of the contract. The provider will benefit from any rise in the value of the property, as they are permitted to sell the house, subsequent to the borrower’s death. However, a part home reversion scheme entitles the borrowers inheritors to a proportion of the sale proceeds.

Home reversion plans works to the borrower’s advantage, as no monthly payments are required, allowing the borrower to use the money to their intentions.  Furthermore, equity in the estate may be retrievable to the owner and his beneficiaries (only applicable to part home reversion schemes). The borrower must however be aware that they will not retain full ownership of the property, preventing them from investing into further plans for the home. It would also be difficult for the homeowner to move homes after the deal is made and increases in income may restrict the borrower’s right to claim for state benefits.

An individual who believes arranging a home reversion or lifetime mortgage will ease their financial situation has to weigh up the costs and benefits of both schemes before deciding on the ideal arrangement. Clients are able to seek assistance from our team of expert advisers, who will supply each client with thorough information on each product and evaluate whether a home reversion or lifetime mortgage plan is most suited to their needs.

Seeking a home reversion or lifetime mortgage? Call us today.

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This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.