Home Reversion Plans
Home reversion is a type of equity release mortgage to help you obtain extra money from their home during your retirement years. Many consumers think about home reversion plans as a way to enhance their quality of life during their later years in life by boosting income or as a capital lump sum.
What is a home reversion?
Home reversion plans work by you selling off part, or your entire home in exchange for a tax-free cash payment. This cash can be received as a regular income, as a one-time lump sum payment, or both. The part of the home that is sold will then belong to the reversion provider & arranged through a legal process. Even though it will no longer be owned by you, you are allowed to stay living in the home until you pass away or move into permanent long term care. You are usually not required to pay any rent, albeit historical ‘Peppercorn rent’.
How does home reversion work?
A home reversion plan means that a company buys some, or all, of your house. In exchange for selling off that piece of your home, you receive cash in the form of either regular income or a larger lump sum payment. Home reversion plans can provide anywhere from 20% to 100% of the market value of the home. There are a few reasons for this lower level percentage range. First, you are allowed to stay living in the home. You are not required to pay any rental fee at all. Secondly, the company is not able to sell the home until you either move into care or pass away. So, they have to wait for your exit before they can put the home on the market to be sold.
A home reversion scheme will provide the highest percentage of market value to those homeowners in good health who are the oldest age of the spectrum. So, the older you are, the more likely you are to receive the higher percentage of your home’s value. This makes sense in that the older you are, the shorter the amount of time it can be expected that you will need to continue living in the home. It is always useful to check any home reversion calculator to ascertain the maximum release.
Home reversion schemes can be very useful and helpful for many homeowners in certain circumstances, particularly when falling or stagnant house prices are expected. However, similar to any financial product, it is important to seek out independent equity release advice to ensure that it is the right product for you.
There are a number of important questions to ask when determining if a home reversion plan is right for you. You will want to know how the scheme could impact your income tax and your eligibility for state benefits. You will also want to know exactly how the plan will impact your living situation in your home. And of course you will want to know exactly what the plan will do for your income. This means knowing if the income you expect to receive will be fixed or variable and if it will be guaranteed. You will need to know the amount you can expect to receive and how long and often it will be paid. These are all important things to think about before deciding on a home reversion plan.
To aid research, there are home reversion calculators that can be used to help give you a better idea of what percentage you can expect, and the maximum equity release cash lump sum you could receive in exchange for selling off all or part of your home.
The equity release home reversion plan is still a unique way to release the equity built up in your home and they can certainly provide a more enhanced retirement. There are a number of home reversion providers throughout the UK and there are a number of different home reversion plans in the UK. Finding the right plan for you is important to help ensure that you are receiving the most you can from your home which importantly includes a guaranteed inheritance.