Are you thinking of taking out a Home Reversion plan to help fund your retirement? You need to make sure you have all the information to hand so you can decide if it is the right choice for you. In this article, we look at some of the most common questions around the pros and cons of this type of Equity Release.
There are a few pros and cons to consider when thinking about agreeing to a Home Reversion plan. The main advantage is the ability to live in your home rent-free for the rest of your life whilst still being able to take a potentially significant amount of money that has built up in the property. The main disadvantage is the fact that you no longer own all or part of your home, with the Home Reversion company owning it instead, and the price they pay will be significantly under the market value of the property.
Most homeowners approaching retirement age will be able to take out a Home Reversion plan. You will also need to have paid off all or most of your existing mortgage. It is a type of Equity Release that allows the homeowner to sell all or part of their home in exchange for a lump sum to use as they see fit; it is usually used to fund retirement or help out family members.
The minimum age for Home Reversion is 65, however the older you are the more money you will be able to release.
No, you do not pay interest on Home Reversion plans. You will receive a tax-free lump sum or agreed monthly income in return for selling part of your home, or all of it if you so wish. This is one of the benefits over some other types of Equity Release whereby compounded interest increases the original loan amount.
An example of a Home Reversion plan would work as follows: a 70-year-old homeowner would like to fund a retirement trip of a lifetime by taking a world cruise with his wife. He contacts a Home Reversion company and works with a qualified Home Reversion adviser and a specialist solicitor to outline all the information he needs to make the decision. Once he is certain, he takes out a plan whereby he sells 50% of his home to the company in return for a cash lump sum. After finalising the details, he is provided with the money and can book his dream cruise. Then, after he passes away or enters long-term care, the home will be sold.
