Now you can stay in your home even after you’ve sold it with a home reversion scheme.
However, there’s essential information you must be aware of to avoid making any decisions that you regret.
We’ll help you discover:
- What’s a home reversion scheme.
- How a home reversion scheme works.
- How much equity you could stand to unlock with these plans.
We’ve done countless hours of research to bring you the latest concise information about releasing equity through a home reversion scheme in Jan 2022.
Let’s take a look at what we’ve found!
What is a Home Reversion Plan?
A home reversion plan is one of the two most popular types of equity release available on the market. It’s intended for individuals over the age of 60. You may use it to unlock tax-free cash by selling all or part of your house. Despite the sale, you’ll be allowed to live rent-free for the rest of your life or until you enter long-term care.
How Does a Home Reversion Plans Work?
A home reversion scheme works by the homeowner selling all or part of their property in exchange for a lump sum of cash, regular payouts, or both. The equity release company gets their percentage of the profits when the home is sold, based on the amount they originally acquired (up to 100%).
Interesting read: How Does Equity Release Work in Jan 2022?
How Much Cash Can I Unlock With a Home Reversion Scheme?
The amount of cash that you can unlock with a home reversion scheme is between 20% and 60% of the value of the part of your property that’s been sold to the lender. The amount is determined by your age, the property value, and possibly your health condition.
Must read: Equity Release Costs Explained
Should I Select a Lump Sum or Drawdown With a Home Reversion Scheme?
Whether you opt for a home reversion scheme in the form of a lump sum, drawdown, or a combination of the both is dependent on your personal circumstances. If you don’t need a large cash injection, a drawdown is always preferable as you only pay interest on the cash you unlock. However, you can opt for an initial lump sum, followed by a drawdown facility being put in place.
What Are the Pros & Cons of a Home Reversion Scheme?
The biggest pro of the home reversion plan is that even though you’ve sold your home, you can still live there. The main con of a home reversion scheme is that you will leave a smaller inheritance to your heirs.
Learn now: Is Equity Release a Good Idea?
What are the Advantages of a Home Reversion Scheme?
The advantages of a home reversion scheme include that the cash is tax-free, you can stay home rent-free, you’re supported by professionals throughout the process, your family will owe less inheritance tax, you can still keep a portion of your estate, there are no compulsory repayments, you can move home if you wish to, and selling your home means you’re protected from a market crash.
What Are the Disadvantages of a Home Reversion Scheme?
The disadvantages of a home reversion scheme are that your access to means-tested benefits will likely be impacted, you’ll be leaving a smaller inheritance, you get less than the value of your estate, you’re no longer the sole owner of your property, there are fees involved, you’ll need to have building insurance and maintain your property, and if you end your plan early, you’ll need to pay back the lender’s portion at market value.
A home reversion plan is a fantastic product to consider, should you want to live in your home, but still sell some of the property in exchange for tax-free cash. However, the equity release process is complicated and you must chat with a financial adviser before making any concrete decisions.
Is a home reversion scheme not for you? Take a look at our comprehensive guide to lifetime mortgages. The most popular type of equity release might be the retirement financial solution you’ve been searching for.