What Are Home Reversion Plans?
Home reversion plans are the other main option for equity release schemes. This type of equity release has its own benefits when compared to a lifetime mortgage and the best choice is essentially dependant upon an individual’s circumstances.
With home reversion plans you are selling all or a percentage of your property to the equity release scheme provider. The sale of a portion or all of your property is compensated by a lump sum payment from the equity release scheme provider or the payment can be received as a monthly income. Although you don't actually own the portion of the property that you have sold, the individual has the right to remain in the property during the remainder of their lifetime.Can the home reversion provider evict you from your property?
The provider does not have the power to evict you from your property and can only take possession for a sale either when you die or when you are taken into permanent care. When such a time arises, your property is sold and depending on how much of the property you have sold to the reversion company, you will receive a percentage. So for example if you sold 50% of your property to a home reversion provider and the property gets sold for £200,000 the remaining 50% of the sale is yours which will go into your estate to be dealt with under your will.What if the property value increases?
If the property value of your house increases when it comes to the sale of the house, depending on what percentage of your house you have sold, when the property goes up in value you will receive your portion of the share even if that has increased in value as a result of a buoyant property market. Conversely, if the property value goes down then your share of the property will also be reduced.How much cash will I receive?
This depends on two main factors:
1. The percentage of the property that you are selling
2. The market value of your property
So in other words, the higher the portion of your property sold to a provider, the higher the cash that is received.
Generally speaking, the amount that you receive under these schemes will be less than market value of the percentage share that you are selling to the equity release scheme provider. This must be remembered if you are planning to opt for a home reversion scheme. The main reason for receiving the lower percentage share is that it could be many years before the scheme provider sees a return on the money that they have lent to an individual. It is imperative that an individual seeks proper advice to choose the right scheme for their circumstances.Should you go down the home reversion route?
Well the answer to this question mainly depends on the individual and the individual’s circumstances. For example if you're somebody who doesn't want to release equity with another mortgage i.e. a lifetime mortgage, then a home reversion plan may be your preferred choice for the simple reason that you're not prepared to take on another mortgage. On the other hand, if you're somebody who has had a real struggle acquiring your property then selling a portion or all of the property may not be to your taste. In such cases you may prefer to go down the route of releasing equity with a lifetime mortgage. So really choosing a home reversion plan depends on what your individual preferences.
One thing we can probably safely say about home reversion plans (and equity release schemes in general) is that they will become more and more popular for people to use since we are now living longer and we are not saving sufficiently to fund our retirement years. Although we are obsessed with buying properties in the UK many people find that becoming property rich and cash poor can end up causing some problems in financing the retirement years
If you are looking to release equity from your home and want to discuss the various options available then contact us and we will advise you of the schemes that best match your individual circumstances.