What is a Home Reversion Plan?

Updated 24th August 2023

Home reversion is a form of equity release scheme that lets you unlock the money that is tied up in your home, giving you a tax free cash sum to spend how you want.

This type of plan however works in a very different way to the other more popular types of equity release, namely lifetime mortgages in that you sell all or part of your home. Here’s how they work:

How does a home reversion plan work?

With a home reversion plan you agree to sell part or all of your home in return for a tax free sum of money. Often referred to as a ‘lifetime lease’, you get to live in your home rent free either for life, or until you move into permanent care. The house would then be sold, the equity release provider would get their share of the proceeds based on the percentage of property they own and the rest would go to your family or estate.

Is a home reversion plan a good idea?

Home reversion could be a good idea depending on your personal situation and requirements. The plan gives you a cash lump sum of between 20% to 40% of your property value. You can use the cash how you want, be it home improvements, to help family get a foot on the property ladder, to pay off outstanding loans or to help fund retirement.

Here are a few points about home reversion to consider:

You get a tax free cash sum to use how you want
You won’t own 100% of your home, only the percentage you haven’t sold
You get to live there rent free
You will still be responsible for the upkeep of the whole property
The home reversion provider will pay less than the current market value for their share
If you want to reverse it you will need to pay the full market value, so it could be expensive
No interest is charged
You will benefit from any increase in house prices but only on the percentage of property you own
You can guarantee an inheritance on the proportion of the property you still own
You can still move home
Home reversion can affect any benefits you receive

Is a home reversion plan right for me?

To be eligible for a home reversion plan you must be 65 or over, live in the UK and own your own home.

The amount of money you can raise tends to be higher than with a lifetime mortgage but depends on your age – the older you are the more money you can get.

All lifetime mortgage and home reversion providers are members of the Equity Release Council, giving you extra protection.

Before you decide whether equity release is right for you in any form, you should talk to the experts, look at the alternatives and understand the options available to you. You can also use the equity release calculator to see how much money you could get.

How does home reversion compare with a lifetime mortgage?

Although a lifetime mortgage and home reversion plan are both types of equity release scheme, they work in very different ways:

Lifetime Mortgage

You secure a loan against your home
You still own 100% of your home
There are no monthly repayments
The loan accrues interest
The interest and the loan are paid off once you have died or moved into care and the property is sold
The loan and interest will affect any inheritance you leave for family, the impact of which will depend on the interest accrued and any increase or decrease in house prices

Home Reversion Plan

You sell part or all of your home
You only own the proportion of the property you haven’t sold
There are no monthly repayments and no interest
You live in the property rent free either until you die or move into care
When the house is sold your family or estate gets your share of proceeds based on the percentage you own, the rest goes to the home reversion provider
You only benefit from increases in house prices on the part of the property you own
Depending on how much of your property you sell, you can still leave an inheritance to family

Also in general terms the amount of money you get with a home reversion plan can be higher than with a lifetime mortgage however they do tend to be less flexible.

Read more about the different equity release options available to you

For your peace of mind..

Overchoices is a member of the Equity Release Council and regulated by the FCA. Wework in association with Age Partnership the UK's leading equity release specialist

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Our aim is to provide you with clear and accurate information to help you research your chosen financial products and services. The material on this site is for general information only and does not constitute any form of advice or recommendation.

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