Top 3 advantages of a home reversion plan

Reasons why a home reversion plan might benefit you

Written in line with our editorial policy.

With a home reversion plan you can enjoy tax-free money with no repayments, stay in your home for life, and guarantee an inheritance for your family. It’s less common than the other form of equity release (lifetime mortgage) but can still offer potential advantages over some other forms of finance. 

There’s much to consider with home reversion plans, so to help you get started we’ll be covering the following to show how a plan might help you to achieve your financial goals:

• What is a home reversion plan?
• Top three advantages of a home reversion plan:
• 1. Access your money with no monthly repayments.
• 2. Guarantee an inheritance for your family.
• 3. Stay in your home for life.
• Speak to an equity release adviser.

Once you have read the following guide, why not speak to a specialist adviser about arranging an equity release plan? Call 0808 178 3055 or request a call back to arrange an appointment with one of our selected advisers. 

What is a home reversion plan?

A home reversion plan is a form of equity release that enables UK homeowners aged 60 or over to access some of the tax-free money built up in the value of their home.  

There are no monthly repayments to make with a home reversion plan and you can spend your money in almost any way you wish.

A home reversion plan differs from the more popular lifetime mortgage because of the way in which you raise your money. With a home reversion, you sell all or part of your home to your provider in exchange for a cash lump sum or income. (A lifetime mortgage on the other hand is a form of loan secured against your property.)

You will then continue to live in your home with the same protections as a tenant, but without any rent to pay. You have the right to live there until the last homeowner passes away or moves into long-term care. 

How much money you receive depends on your age, the value of your home, and in some cases even your health. Usually, the older you are, or the more qualifying health conditions you have, the more money you can release.

How is a home reversion plan paid back?

When the time comes, your home will be put up for sale and the money is used to pay off your home reversion plan. 

If you sell all of your home’s value to the reversion company then they will keep 100% of the sale price. 

If you sell a percentage of your home’s value, say 50%, then the reversion company will keep 50% of the proceeds of the sale. The remaining money is then returned to you, or to your estate if you have passed away.

Top three advantages of a home reversion plan

There are some benefits to a home reversion plan which might make this financial product a more suitable or appealing option over other forms of later life lending. 

For your convenience, we have summarised three of the main advantages of a home reversion plan, which include:

1. Access your money with no monthly repayments
2. Guarantee an inheritance for your family
3. Stay in your home for life

There are of course disadvantages to home reversion too, which you should consider carefully. For example, the home reversion company will offer to buy your home or a share of it at a rate that is significantly below market value. This reflects the fact that they will not see a return on their investment for potentially many years, but it will affect how much inheritance you can leave.

Speak to our selected advisers for all the home reversion information and guidance you need. Call us on 0808 178 3055 or request a call back here.

1. Access your money with no monthly repayments

The main benefit of a home reversion plan compared to most forms of lending is that you will never have to make any monthly repayments. Instead, your plan is repaid from the sale of your house when you pass away or move into long-term care.

There is also no interest to pay on a home reversion plan. This contrasts with lifetime mortgages, where compound interest accrues on the loan. However, remember that the amount of money you are offered for your home will be significantly less than the current market value. 

2. Guarantee an inheritance for your family

If you choose to sell a percentage of your property to the home reversion company, rather than all of it, you can leave your remaining share for your family to inherit.

By doing so, you can unlock the money you need now and guarantee an inheritance for the people you love most. 

For example, if you sell 40% of your home to a reversion company then it will keep 40% of the sale price when your home is sold upon your death. The remaining 60% will then be paid to your beneficiaries.

Depending on how long you live after arranging your plan, you or your family could see significant increases to the value of your share of your home in the future. However, do remember of course that even if you sell just a small proportion of your home to a home reversion company, this will reduce the overall value of your estate.

3. Stay in your home for life

You won’t have to leave your home to access your property wealth when you arrange a home reversion plan. In fact, you can continue to live there as a tenant rent-free until you pass away or move into long-term care, without any monthly repayments to make.

This contrasts with some other forms of later life financing in which you would need to move home, such as downsizing to a less valuable property. 

If you own your home with your spouse or partner, you both have the reassurance that you can remain there until the last homeowner passes away or moves into long-term care.

This guarantee is one of the five guarantees of equity release, which all members of the Equity Release Council must sign up to. For your peace of mind, our selected advisers will only ever recommend plans from providers who are members.

Talk to an equity release adviser

Home reversion isn’t for everyone, and the majority of equity release is done through a lifetime mortgage. But home reversion plans are suitable for some people. For example, they may enable you to raise more from your home than with a lifetime mortgage.

There’s much to know and understand about your options. That’s why our selected advisers will take the time to understand your unique circumstances before advising on suitable products and searching for the best plan for your needs. They’ll also help arrange your plan for you if you choose to go ahead.

Please call 0808 178 3055, or request a call back for a time that suits you to arrange an appointment with one of our selected advisers.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn