We know that when retirement eventually dawns on us, that most will still have some baggage to carry into their golden years. This could be by way of a mortgage or secured loan, which once income drops in retirement, may affect their future affordability. This is just one of the categories of people that equity release schemes may suit. One particular plan is the home reversion scheme which is available to homeowners over the age of 65 years. In case of joint applicants, the younger partner must be over 65 years. Different home reversion providers have different terms, but the minimum value of the property that can be considered for reversion is £75,000.
Home reversion is a way of releasing equity from the house without the need to move out of the property. However, unlike a lifetime mortgage which is a loan, a home reversion involves selling a portion of your house to release proportional equity in the form of a cash lump sum.
Home reversion is therefore suitable for anyone who owns a home, is over 65 years, and wants to access their equity while continuing to live in their home.
Home reversion plans guarantee clients the right to continue living in their house, rent free, until they die or move into care. At this point, the house is sold and the amount recovered by the provider. As it is not a loan, there is no fear of a home ever being repossessed by a home reversion provider.
Also, home reversion plans approved by the equity release council come with a no negative equity guarantee which guarantees that if the sale value of the property is lower than the original amount borrowed, the difference will be written off, and will not have to be paid by the client’s beneficiaries.
This ensures that with home reversion, your beneficiaries never have to pay the provider. It is also suitable for those who want to go further and ensure that they leave an inheritance for their family. For instance, by selling only 25% of the property, you can ensure that 75% of the property value will go to your estate when the plan ends.
Home reversion also provides for the possibility of releasing more funds in the future. For example, you can release a lump sum now, and make arrangements for guaranteed annual releases for a set number of years. You can also access maximum cash from any remaining equity in the future as some providers guarantee maximum release successively until 100% of the property is sold.
Home reversion can offer good value during a slump in the market, as you are able to transfer the risk of falling house prices to the provider. Also, in general the longer you live the better value home reversion offers. You are able to live rent free in your property while accessing all the equity in your house, and your beneficiaries are guaranteed never to have to pay anything to the provider in case of negative equity.
Tags:Equity Release Council, Equity Release Schemes, Home Reversion Plans, Home Reversion Providers, Home Reversion Schemes, Joint Applicants, Lifetime Mortgage, Maximum Release, No Negative Equity Guarantee, Releasing Equity