Home Reversion Plans

A home reversion plan is one of the two main types of equity release product, and can ‘unlock’ all or some of the capital tied up in a home. It is not a mortgage and involves you selling your home, or a proportion of it, to a home reversion plan provider in return for either a monthly income or a lump sum. You retain the right to live in the property as a tenant (but paying no rent) until you die or move into a nursing home on a permanent basis.

There are two main types of Home Reversion Plans:

With full home reversion, you sell your home in full and have the right to live in the property as a tenant until you die or move into a nursing home on a permanent basis. The home reversion provider will own your home outright and will benefit from any increase in its value from the date of sale.

With partial home reversion, you sell a specific percentage of your home and have the right to live in the property as a part-owner/part-tenant until you die or move into a nursing home on a permanent basis. When the property is sold, the proceeds are split accordingly to the equity share owned by both you and the home reversion provider.

You may not be able to transfer your partial ownership of the property at a later date as this will depend on the conditions set out within the agreement between you and the home reversion provider.

Many reversion plans require you to pay rent and is often only a nominal value i.e. £1 per month. The actual amount you will need to pay should be disclosed before any agreement is made. With a partial home reversion plan, you can leave the unsold proportion of the value of your property to your beneficiaries.

There are however disadvantages to such plans. When you sell your home in full, you do not benefit from any increase in the value of your property from the date of sale. Also, you will not get the full market value when you sell your property (or part of it) to a home reversion provider, as providers will typically only pay from 35-60% of your home’s current value. Lastly, you cannot change your mind once you have taken out a home reversion plan.

Eligibility depends on a number of factors, such as how much your property is worth, your outstanding mortgage and your age. You will usually need to use the amount released to pay off any existing outstanding mortgage.

Typically the older you are when you take out a home reversion plan, the higher the percentage you will get of your home’s market value at that time.