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Home Reversion Plan

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What is a Home Reversion Plan?

A home reversion plan allows an older borrower to sell all or a percentage of their home to free up cash and to continue living in the property, usually rent free without having to sell.

A home reversion plan is a type of equity release mortgage aimed at clients typically above the age of 65 looking to increase their income or raise money. A home reversion plan is part of our over 60s mortgage product range.

The funds from a home reversion plan can be taken as a lump sum, an income, or a combination of both depending on your personal circumstances.

Home reversion plans are not assessed on affordability like standard mortgages, therefore low income, bad credit, self-employment, or complicated situations are usually accepted. The amount you can borrow will depend on your age, health, and property construction.

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How do home reversion plans work?

Home reversion plans work by the lender buying all or a share of your home, typically offering a price below its open market value.  

You will have a contract in place that allows you to continue living in your home, usually rent free, until the property is sold.  Usually this is when you die or go into long term care.  

When the sale happens, the lender will sell it and retain their share of any profit made.  You will never need to pay more than the value of your home while living in the property.  

Once your property is sold to the home reversion plan lender, you’ll no longer benefit from any price increases and any means tested benefits might be affected. 

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Why seek mortgage advice on home reversion?

There is a strong possibility that other types of later life mortgage capital raising product may be more beneficial for your personal situation.

Receiving advice from a later life mortgage advisor authorised to look at the whole market, is crucial.

The amount of cash you can receive will vary by lender therefore it’s important that you utilise the experience of a mortgage broker in order to shop around to get you the best deal.

Also, the lenders that offer home reversion plans are different to regular mortgage providers therefore it’s not something that you can do online etc, specialist mortgage advice is required.

Home reversion plans will have significant impact on your estate value, inheritance, and any means tested benefits so therefore it’s important that you understand all the risks associated with one.

There are lots of later life lending options available to older borrowers in the mortgages for over 60s range.

It’s also important that you seek independent legal advice when considering a home reversion plan to ensure you understand the terms and conditions.

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Home reversion FAQs

What is a home reversion scheme?

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A home reversion scheme is a type of equity release mortgage borrowing aimed at older people, where the homeowner effectively sells a proportion of their property (or indeed the full property) for a cash sum which would typically be below the property value.  

As part of the home reversion scheme terms and conditions, the seller is then allowed to remain in the property, usually rent free for the rest of their life or until they move into long term care or die. 

There are alternatives to home reversion schemes such as a remortgage, a retirement interest only mortgage, or a lifetime mortgage etc.  

Home reversion schemes are not assessed on affordability like regular mortgage applications, therefore lower income, low credit score, being self-employed, or complicated situations are likely to be accepted.  

The amount you can borrow on a home reversion scheme will depend mainly on your age, health, and property construction.  

What is home reversion?

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Home reversion simply means that you sell your home (or possibly a proportion of the home) for a cash lump sum, and the home reversion provider then allows you to continue living there until you die or go into long term care.

The plan provider will then sell the property and retain the proceeds when you die or move into long term care.

Home reversion is typically available to clients over the age of 65 and usually no interest payments are required.

How much money you can get on a home reversion is not based on affordability like traditional mortgages, they are more based on your age and property type/build etc.

Can I sell half my house?

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Yes, you can sell half your house if you’re looking to raise money.

If you’re over the age of 60 you will likely have the option to sell any proportion of your house typically from around 25% up to 100% at below market value to raise money or increase your income.

You should be aware that with home reversion you would not receive the same value as you might expect if you were to sell on the open market, but that is because you do not have to vacate the property as the plan provider allows you to remain in the property for the rest of your life or until you go into long term care.

The money you raise can be paid to you as a lump sum or as a regular income depending on your personal situation and needs.

Home reversion should be considered along with the other later life mortgage types that are available in the retirement mortgage range.

Can I move home after doing a home reversion plan?

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Yes, possible, most home reversion plans are portable and allow you to move home if required.   

Reasons that some clients choose to move home after doing a home reversion plan is to downsize into a smaller property.  

Home reversion plans should not be entered into lightly and if you are thinking of moving soon, therefore, it’s important that you talk through your situation with an experienced independent mortgage broker to discuss other products that may be more suitable.  

What does home reversion plan mean?

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A home reversion plan means that you sell your home, or a proportion of it, to the plan provider.   Home reversion plans are available to customers usually over the age of 60+ looking to release cash or increase their income whilst wanting to stay living in their home.

You can expect to receive less than the market value but in return you will be allowed to remain in the home for the remainder of your life or until you enter long term care.

A home reversion plan is part of a wider range of later life lending over 50s mortgage solutions.

Who are the home reversion plan providers?

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Home reversion plan providers are not ones that you’ll find on the high street or online.   

Home reversion plans are accessed through whole of market mortgage brokers, like us, who can provide advice on the full range of later life lending solutions.  

Home reversion plan providers will be more interested in the type, construction, and condition of your property rather than your income and outgoings like standard mortgages.  

An in-depth survey and valuation will be carried out to assess whether the home reversion plan provider will buy the property and for how much.   

Can I get a home reversion plan with bad credit?

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Yes, you can get a home reversion plan with bad credit. There is no requirement to make payments, your credit profile has no bearing upon what you might receive.  

The only factors that will influence the amount you may receive on a home reversion plan, are your age, and the condition and value of the property. 

What are the advantages of a home reversion plan?

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The advantages of a home reversion plan are: 

  • You can release equity from the value of your property to pay for care or living expenses. 
  • Joint home reversion plans are available, all parties must be in agreement to the application.  
  • Most home reversion plan providers are part of the equity release council therefore they offer a no negative guarantee meaning you’ll never owe more than the value of your home.  
  • Most providers offer portable plans meaning that you can move home if you wish.  
  • You can stay in the property via a lifetime lease usually rent free until you die or move into long term care. 
  • You avoid the inconvenience of having to move home. 
  • The money released is tax free and can be taken as an income or as a lump sum.  

What are the disadvantages of a home reversion plan?

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The disadvantages of a home reversion plan are: 

  • You will receive less than the market value of your property and, depending upon your age that can be considerably less. 
  • There will be fees involved, typically property maintenance, valuation, mortgage advice, legal, and survey. 
  • You would reduce the value of your estate any potential inheritance value for your family. 
  • Flexibility, home reversion schemes are not as flexible as other equity release types such as a lifetime mortgage. 
  • You will not benefit from any property rises in the future should house prices increase.   
  • The funds received could affect any means tested benefits that you receive.  
  • If you did decide to end the plan early, you would have to buy back the property at full market value, even though you’d sold it at significant discount. 

What is the maximum percentage for a home reversion plan?

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The maximum percentage you can sell is 100% of the value of the property.  However, the property value might be less than you would receive on the open market if you wanted to move out.   

You can also sell a lower proportion also with home reversion plan providers typically start from 25% up to the maximum of 100%. 

There may be more suitable products available to you that will allow you to release equity such as an interest only mortgage or an equity release mortgage.  

What are the age limits on a home reversion plan?

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The age limits on a home reversion plan can vary slightly from provider to provider but the typical minimum age is 60 and there is no maximum.  

The older you are or if you have ill health, you’re likely to receive more money from your property.  

If the property is jointly owned, both applicants would need to be accepting of the application and terms would be agreed for both applicants to remain in the home.  

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We'll help you overcome hurdles that you face along the way, for example, removing the stress of property survey and valuation problems.

Home reversion plan popular customer situations:

Home reversion plans for an unusual property type

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Home reversion plan providers can consider unusual property types as they are primarily concerned with the ultimate value of the property.  Also, whether the property is likely to be sold at a profit following the death or entry into long term care of the customer.

As a result, in certain circumstances, home reversion plan providers may be prepared to consider property that may not be mortgageable in other circumstances, but this would very much be on a case-by-case basis.

Home reversion plan for a client with no family or inheritance plans

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Home reversion plans see the full value of the property pass to the plan provider when the former homeowner dies or goes into long term care.

Thus, there would be no value to pass on to any family or other beneficiaries. There are circumstances where a home reversion plan could pay out more than other types of equity release mortgage product, which may be of more value to those clients for whom leaving an inheritance is not a consideration.

Home reversion plans and terminal illness

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Home reversion plans may be worthy of consideration for those with a terminal illness diagnosis.

In circumstances where there is a shortened life expectancy, there is the possibility that the home reversion plan provider may pay out more than “normal” with funds likely to be available comparatively quickly, because the provider knows they will not have to wait too long to be able to sell the property.

Home reversion plans with bad credit

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Home reversion plans can be suitable for people with a bad credit history. This is because the plan is based entirely on a combination of the applicant’s age and the value of the property. Since there are no monthly repayments required, the credit history is of no relevance to the lender.

Lifetime mortgages versus a home reversion plan

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Whilst both plans allow you to release some of the equity built up in the property, there are differences.

Overall, lifetime mortgages tend to offer more flexibility, with options for making interest payments or letting interest roll up whilst, crucially, ownership of the property is maintained. Thus, any remaining value in the property after the outstanding debt has been cleared can be passed to beneficiaries.

With a home reversion plan, there would be no residual value to pass to beneficiaries and there is far less flexibility in terms of making any payments etc. However, depending upon age, the applicant may possibly be able to obtain a bigger cash sum which, for the right client, may be more of a priority.

Seeking independent later life mortgage advice is vital so that you understand all the options available to you and the risks associated with each.

We'll find you the most suitable home reversion plan

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UK Moneyman Limited is Registered in England, No. 6789312
Registered Address: 10 Consort Court, Hull, HU9 1PU.

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We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk

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