Home Reversion Schemes

Home reversion schemes allow you to sell all or part of your home to a lender in return for either income or a lump sum. Under these types of equity release schemes you/your beneficiaries only receive a percentage of the eventual house sale price, with the remainder being the lender’s.

The proportion of your home’s value you receive depends upon your age, sex and health - essentially, the lower your life expectancy, the more you can have. It also takes into consideration that the lender cannot re-sell the property until either your death or you need to move into permanent long-term care. Under these schemes you sell the legal ownership to the company and become a tenant, but you are still responsible for the property, bills and other outgoings relating to it. Whilst you sell legal ownership under such a scheme, you are still guaranteed the right to live there for the rest of your or your partner’s life by way of a lifetime lease – either rent free or for a nominal rent (e.g. £1 per month).

Some lenders will only provide the capital released in the form of regular income, an ‘annuity’. Others may give you the choice of having a lump sum, or both.

When you (or in the case of joint applicants - the last survivor) die, the lending company receives back the same percentage share, as agreed at the outset, but at the sale value at the time of death - including any growth in the property’s value. Some schemes allow you to benefit from an increase in property values while others do not. Some will allow you to sell 100% of your property, while others limit it to only 90%. A key point here is that if the value of the property decreases, the amount belonging to the reversion company also decreases.