Home reversion companies
What is home reversion?
If you are thinking about taking out a loan to fund your retirement, you might want to consider home reversion instead.
If you want to continue living in your home but need an extra income for long-term care services, home reversion could work for you.
Topics you will find in this article
A home reversion scheme is a financial product where you sell all or part of your home to a home reversion provider. They work by giving you either a regular income for the rest of your life, a tax-free lump sum of money, or both.
A home reversion plan can be used to pay for care costs. It is suitable for those who need home care as you would need to sell your house if you went into a care home.
You might want to use the lump sum to pay for home adaptations that would make it easier for you to receive care at home. No matter what percentage of your property you sell to the provider, you do not have to pay rent to live in your home.
Some plans have the option for you to pay a small amount of rent, increasing the tax free lump sum you would get upfront.
You do not need to pay interest with a home reversion plan. This is because you do not borrow any money.
This article will provide you with free, impartial advice on whether home reversion is right for you. It will explain the differences between products that are available.
You should also contact a professional financial advisor, who will be able to give you advice on what kind of plan is right for you.
Here is a video that explains what a home reversion plan is.
Who are the main home reversion companies in the UK?
A mixture of companies such as insurance providers and retirement providers offer home reversion in the UK.
There are far more lifetime mortgage providers than home reversion providers. For example, banks like Nationwide and insurance providers such as LV only provide lifetime mortgages.
According to the Equity Release Council, less than one percent of all equity release plans taken in the second half of 2019 were home reversion plans.
Home reversion tends to be offered by retirement service providers. Sun Life and Standard Life are two examples of over 50’s insurance companies who provide home reversion.
Sun Life is an over 200-year-old company who specialise in cover for the over 50’s. They mostly provide life insurance.
Standard Life also focuses mainly on pensions and retirement. They are partnered with Aberdeen Standard Investment, who provide their investment funds.
As home reversion is an uncommon service, you should be extra wary of bogus products. You should check to see that the product you want to buy is authorised and regulated by the financial conduct authority.
Are home reversion plans regulated?
The Financial Conduct Authority regulates home reversion plans to ensure that they are safe and fair. The FCA has a register which you can search here. The register will tell you if a provider or financial adviser has been authorised as safe to do business with.
It is important to contact a financial adviser before taking out equity release. They can answer any questions you might have about the plan as well as explaining any details in the terms and conditions.
The Equity Release Council also lists approved providers on its site here. These are the best home reversion plan providers to deal with.
What is the difference between home reversion and other types of equity release?
The main difference between home reversion and other types of equity release is that with home reversion you sell part of your property. A lifetime mortgage is a loan that you pay back with the sale of your house. You cal also use a home reversion calculator to see how much you could receive.
Lifetime mortgages are the most popular equity release products. With a lifetime mortgage, you borrow money from a lifetime mortgage provider.
No share of your home is sold with a lifetime mortgage. You simply repay the money when your house is sold, either when you move into permanent care or you die.
Home for life plan pros and cons
Home reversion schemes carry a significant financial risk because you could lose out on the full market value of your home. In the first place, the company will buy your house well below its market valuation.
Also, because the company will own a share of the property until it is sold, their share will more than likely increase in value over time. This means that they will receive a lot more of the value of your house relative to what you were provided with when you took out the scheme.
- Mr Duck takes out a home reversion plan when in 2010 he is 65. His house is worth £167,000 and he sells a 50% share to a home reversion company to help with care costs. The share is sold at £30,000, which is well below market value.
- Ten years later, he goes into permanent residential care and his house sells for £230,000. £115,000 goes to the home reversion company and £115,000 goes to Mr Duck.
- Mr Duck and his family are £85,000 worse off than they would have been if they had not sold the property to the reversion company.
However, home reversion plans are suitable for some people as they offer an immediate cash lump sum or income. Some people do not have time to make a long-term plan as care needs can arise unexpectedly.
What effect will a home reversion plan have on my inheritance and income?
A home reversion plan could affect your entitlement to means-tested benefits. This is because you would gain an income or payout takes you over the threshold for things like Pension Credit Guarantee.
When planning to take out a home reversion scheme, you should consider how the extra money will affect your entitlements.
A home reversion plan will reduce the value of your estate. This might mean that you can leave less in your will than you expected.
I don’t own my home outright – can I still access home reversion services?
Even if you still owe money on your mortgage, many home reversion providers will still allow you to take out a service. It might just mean that you receive less money than if you owned your home outright.
Another factor which affects how much money you can unlock is your age. The younger you are, the less money you can typically receive. For many products, there is a minimum age.
If you take out a lump sum, living longer increases the chance that you run out of money. Yet if you opt for an income, you might pass away soon after taking out the policy meaning that your family loses out on a lot of money.
Equity release schemes are complicated because they involve planning around how long you think you will live. That is why it is especially important that you seek out expert advice if you are considering these services.
Should I take out a home reversion policy?
There is no right or wrong answer to this question. Different products work better for different people’s finances and by no means is equity release right for everyone. It is important that you seek help and advice when considering different retirement options.
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Other articles related to Home Reversion Plans you will find useful
What is a Home Reversion Plan?
A home reversion plan is a form of equity release scheme. Equity release schemes are a way of releasing some of the value of your property in exchange for cash. Lifetime mortgages are another type of equity release scheme.
Home Reversion Calculator
An equity release home reversion plan calculator gives you an idea of how much money you can get with home reversion. Typically, equity release may range between 20%-60% of the value of your property.
Home Reversion Companies
A mixture of companies such as insurance providers and retirement providers offer home reversion in the UK. There are far more lifetime mortgage providers than home reversion providers.
Equity Release Calculator
An equity release calculator allows you to effectively ‘try before you buy’ and plan ahead. It’s a great way to see how much capital you can (and should) release from your home. This articles explains how they work.
How Does Equity Release Work?
Equity release generally involves stumping up the entirety or a portion of the value of your property in return for cash. The cash can be spent however you wish. This article looks at how it works in more detail.
Pros & Cons of Equity Release
Equity release schemes do have many benefits – but they aren’t suitable for everyone. Each individual provider and type of scheme will also have individual positives and drawbacks. This article looks at what you need to look out for.