Home Reversion Plans

Home Reversion Plans

Home reversion plans are a form of equity release and work on the basis that a homeowner applying for the reversion receives a non-repayable sum of money in exchange for shares to their property. The provider may have shares in part of the house or they may own the whole property. Clients are able to consult to our advisers, with the promise that they would be advised on the most efficient and affordable scheme in terms of home reversion plans.

The seller is guaranteed occupancy within that property until one or more of the qualifying termination events occur. These events include the death of the seller, the seller becoming a residence at a care home for their remaining days or at the end of a period of a minimum of 20 years to the day the agreement was made. After the agreement has been terminated, the provider has the authorisation to sell the property. The provider keeps all profit from the sale if they own a 100% share in the home; otherwise the inheritance of the deceased is entitled to a percentage of the sale if the agreement was a shared home reversion plan.

Home reversion plans can benefit many individuals, the first being the fact that no monthly interest payment is required, so all the money generated is available for the individual to use at will. In addition, the homeowner is guaranteed occupancy for life and home reversion plans tend to offer higher sums of money than lifetime mortgages, another equity release option. Also, part home reversion plans allow the inheritance to profit from the sale of the house after the individual’s death; the heirs may even have the option to purchase the property at market price, using the shares of the property to contribute to the purchase. In addition, a proportion of the property will be out of the estate, hence reducing the overall inheritance tax liability. Our adviser’s expertise may be of assistance in helping the client decide whether a full home reversion plan or a part home reversion plan will be more beneficial to the clients needs.

Conversely, there are risks associated with home reversion plan. The amount of income generated by the seller from the provider will not reflect the true property value, alongside the fact the owner loses independent rights to invest in future planning of the property. Another major factor that may disrupt home reversion plans could be the death of the initial owner relatively shortly after the contract has begun. This will result in a costly process for the heir of the deceased and it would also be very difficult for the initial owner to move house during the length of the arrangement.

It is not impossible for the individual to move to another property. If they receive consent from the provider of home reversion plan provider they may be able to come to an agreement, allowing them to move homes. This would only work if the agreement was a shared home reversion plan, as the individual would be able to use their share in the original house to purchase the new house. However it is very unlikely that this would be the case.

Home reversion plans would be more suited to elderly individuals. It is a sensible option if the individual lives alone and has no inheritance to succeed their estate, in which means the property is sold by the home reversion providers. However, this method of equity release allows the providers authorization to the property and any beneficiaries would not have access to the property after the original owner’s death.

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

CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN ANY DOUBT, SEEK INDEPENDENT ADVICE.