Home Reversion Plans
A Home Reversion Plan enables you to release equity in your home by agreeing to sell a proportion of your property to a Home Reversion Plan company. In exchange for the company owning a proportion of your property, you can receive a tax free lump sum or an income.
How Much Of Your Home Do You Receive?
The amount of money you receive from a Home Reversion provider will always be less than the full market value of your property. You will continue to live in your home until you move into care or die. You will be a tenant and pay a rent which could be a nominal amount.
How Much Of Your Home Do You Sell?
You do not need to sell all of your property in order to release equity with a Home Reversion Plan. But how much you receive will depend on a number of factors including the value of your home.
Features of A Home Reversion Plan
Releasing More Money From Your Home
Depending on the amount of equity left in your home and prevailing property prices, it may be possible to release additional money from your home. This can be achieved by increasing the rent you pay to the Home Reversion Provider.
Often you can release more equity from a Home Reversion Provider than you can from a Lifetime Mortgage.
Impact On Your Estate
Some Home Reversion companies provide a Minimum Inheritance Guarantee which guarantees that some money will be paid to your beneficiaries if you move into a care home or die.
Advantages of a Home Reversion Plan
The advantages of taking out a Home Reversion Plan are:
Home Reversion plans entitle you to remain in your property for as long as you are able because this form of equity release scheme is based paying back your loan when you leave your home and it is sold.
Zero or No Interest Payments
The only interest payments you will have to make might be for a rent – and this is likely to be a ‘peppercorn’ rent for a nominal amount.
Benefit From Property Price Rises
If you opt for a Home Reversion Plan that is for a proportion of your home – not the full amount – then you will be able to benefit from increases in the value of your property. Conversely, your property price will fall if the market is falling.
Reduced Inheritance Tax
The proportion of your property that is owned by the Home Reversion company will not be included in your estate for inheritance tax purposes. The current rate for inheritance tax is £325,000 per person (and you can transfer your rate to your spouse).
Disadvantages of a Home Reversion Plan
You Will Receive Less Than Your Home Is Worth
Home Reversion schemes pay less than the full market value of your property and so you will suffer an immediate reduction in total value of your estate.
Lose Eligibility To Means Tested State Benefits
By receiving an income or cash lump sum from which you draw income, you may lose entitlement to some means tested State Benefits along with other grants, eg home improvements for insulation, etc.
Your Home Might Not Be Eligible
Some homes are not suitable for equity release using a Home Reversion plan. Examples include:
- The tenure of your property must be freehold or leasehold – and the lease must have a long term remaining.
- Holiday homes are unlikely to be eligible
- Buy-to-Let properties may not be eligible
Your Estate Will Be Worth Less
By selling a proportion of your home to a Home Reversion company, you will be reducing the value of your estate when you die which means there will be less to pass onto the beneficiaries of your estate.