A Home Reversion Plan Mortgage involves selling all or part of your property in exchange for a cash lump sum, regular payments, or both.
The ownership of the property (or part you sell) reverts to the reversion company, which grants you a lifetime lease to enable you to remain at your home.
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A home reversion scheme essentially sees you sell all or part of your property at less than its market value in return for a tax-free lump sum, a regular income, or both.
You get to stay on in your home as a tenant, paying no rent, but when your home is eventually sold, the reversion company gets their share of the proceeds of the sale.
First and foremost, a home reversion plan is not a lifetime mortgage; it is quite the opposite. Rather than taking out equity at an interestable rate, you can sell all or part of your property in exchange for a cash lump sum, regular payments, or both.
Typically, you can expect to get between 20% - 60% of the market value of your home (or the part you sell). You must also be above the age of 65 and a homeowner.
In the case of a home reversion plan, you can guarantee what portion of your home will be left as inheritance for your beneficiaries.
The ownership of the property (or part you sell) reverts to the reversion company. In exchange, the reversion company grant you a lifetime lease for your property, meaning you can remain there rent-free without the need to make repayments.
For instance, if you chose to sell 50% of your property to the reversion company, you would receive payments based on this agreement.
If it came to you requiring long-term care or if you passed away, the proceeds of your home would be split 50-50 between the company and your beneficiaries.
The final amount received would be in accordance with house pricing, at that time, in the market. This means both parties could benefit from any increase in housing prices.
There are three options to consider when releasing equity through a home reversion plan. Firstly, a lump sum, giving you the freedom to take a large amount of cash - however, once it’s gone, it’s gone.
Secondly, you can choose to have a regular ongoing income. Although this option is not as lucrative as a lump sum, it does give you peace of mind that a guaranteed amount will be received for the rest of your life.
Lastly, you can combine the above, taking what you need as a lump sum and then spreading the rest across regular payments.
The main consideration is that it means you no longer solely own your home, it can impact on your benefits and can be inflexible if your circumstances change.
These mortgages do not suit everybody and individual circumstances play a huge part on whether they are the best option for you.
We’d therefore recommend speaking to a member of our team to discuss your personal position and consider whether this is the right option for you.
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