What are home reversion plans?

With home reversion plans, you sell all or part of your home, but you continue to live in your home. After you and your partner have died, your house is sold and the proceeds are split between the home reversion provider and your, or your partner’s, estate.

Home reversion plans are regulated by the Financial Services Authority (FSA).

Here are the pros and cons of the home reversion equity release plans:

Here’s what happens if you choose the home reversion route: You sell your home or a share of the equity in it to a reversion provider for a lump sum OR in return for a monthly income (or a combination of both). Technically you become a tenant, albeit with the right to continue living in your home rent-free for the rest of your and your partner’s life.

When the property is sold, usually when you die, the home reversion provider receives its payout. If, for example, you sold 80% of your property to them, then they get 80% of the proceeds – including any growth in the value of their share. If you sold 25% of your property, they get 25% of the proceeds, and so on.

The amount you receive is based on your age, gender and health (and your partner’s). Older people will get more, and men get more than women – because of the differences in how long each are expected to live.

Pros

  • No ongoing repayments to make, the reversion provider must wait until the property is sold to receive any money
  • You know at outset what share of your home (if not its value) you will be leaving to your family
  • You continue to share in any rise in the value of your property (unless you have sold its entire value).
  • You can usually sell a further share of the property, if you had retained a share at the start
  • If you have a serious illness, you may be able to get a bigger payment

Cons

  • The home reversion provider will buy your home at a discount to the current market value
  • If you die soon after taking out a plan, you could effectively have sold off your house (or a share of it) on the cheap. However, some schemes give families a rebate if you die within the first few years of signing up
  • Some home reversion providers can be very choosy about which kind of properties they accept

Important Notes

Please remember, that if you do choose to release equity from your property that it may affect your tax position and/or any benefits you receive from the state. That’s why it’s important to seek advice from an independent, specialist equity release financial adviser who will explain it all to you. They can also give you a personalised illustration of the different equity release schemes available. It’s also advisable to obtain specialist equity release legal advice for you and your family.

For peace of mind, always choose a SHIP member provider for your equity release needs.

General information about financial services, including home reversion plans, is available from the Financial Services Authority (FSA). The FSA is an independent watchdog set up by the government to regulate financial services and protect your rights. The FSA provides free and independent information about equity release on its website at moneymadeclear.