Home Reversion Plan

What Is A Home Reversion Plan?

A home reversion plan enables you to sell part or all of your home to a reversion company in exchange for a cash lump sum. Some reversion companies buy the home themselves, while others merely act as agents for buyers.

Features of a Home Reversion Plan

Here is a summary of the features of a home reversion plan:

Lifetime Tenancy

You retain a lifetime tenancy in your property: you have the right to remain in your property until death or the sale of your property.

‘Peppercorn’ Rent

Some plans require the plan-holder to pay a ‘peppercorn’ rent: this is a small rent paid monthly or annually.

Release Capital At Different Times

Often it is possible to release tranches of capital at a time: for example, 25% followed by another slice of 25% a few years later.

Benefit from House Price Rises

By continuing to own a proportion of your property, you will continue to benefit from any gains in the value of your house. Conversely, you will also suffer from any falls in its value when property prices decline.

How Much is Sold?

You agree what proportion of your home is sold with the home reversion firm, according to your financial needs. For example, in a partial home reversion plan, you might want to sell 40% you’re your property and retain 60% of its value.

Using the Capital You Release

Some Home Reversion Plans allow you to do what you like with the cash; but others require it to be invested in a fund or another vehicle like an annuity in order to give you a regular income.

Restrictions of A Home Reversion Plan

There are number of drawbacks to taking out a Home Reversion Plan:

You Will Not Get the Market Value of Your Property

It is unlikely that you will get the market value for your property at the time it is arranged; something in the region of one-third to two-thirds is more likely. The amount you receive will depend on your age and chosen scheme, and this reflects how long the reversion company’s money is likely to be tied up in your property.

Age Restrictions

Home Reversion Plans are only available for older individuals – say over 6o or 65.

Almost Impossible to Reverse a Home Reversion Plan

Home Reversion Plans are difficult to reverse (in fact, reversal is often not possible),

Restricts Moving House

You are likely to lose out if you move soon after taking out the Home Reversion Plan.

Regulation of Home Reversion Plans

If you are considering taking out a Home Reversion Plan, you should consult with a consultant who is authorised by the FCA.