Home Reversion
Home Reversion
These schemes mean that all or part of your home is sold to an investment company. These are called "Reversion Companies". In return they will give you a cash lump sum, or an income for the rest of your life and sometimes a combination of both.
In technical terms you then become a tenant of the reversion company, although you have the right to live there for the rest of your life rent free or for a nominal rent. This is called a lifetime lease.
This can be complicated to explain, although a Bright Equity Release Solutions adviser will go through your own circumstances and finances with you in great detail to demonstrate precisely how much money you could obtain from your property under this kind of scheme. Probably the best way to explain is to give you an example. This example is taken from the Financial Services Authorities own factsheet:
"George, 68, takes out a home reversion. He sells half (50%) of his home to a home reversion company. His home is valued at £100,000. The company offers him a lump sum of £20,000, which is 40% of the market value of the half share. When George dies 15 years later, his home, which is now worth £150,000, is sold. The reversion company takes £75,000, which is half their share of the selling price, leaving the rest for George's beneficiaries."
Because you are continuing to live in the property and it is unknown when the reversion company will get their money back, you will not get the full current market value of your property. Selling all of your property to the reversion company will mean that you will typically only get between 30% and 60% of its value at the time of sale. Figures are calculated taking into consideration your age and that of your partner's and older people will get more. Men also get more than women because women are expected to live longer.
If you are selling your home along with your spouse or partner, it would only be sold by the reversion company after the last of you dying or moving into long term care. Any money left after the sale would go into your estate as usual, unless you had sold 100% of your property to the reversion company.
Of course it is always recommended that you seek Independent Legal Advice before entering into an equity release agreement. Bright Equity Release Solutions can introduce you to legal experts in this area.
The advantages of Home Reversion...
- For some people higher amounts can be released compared to Lifetime Mortgages.
- Home reversion plans can be available if you are aged 60+ and typically you will be able to raise more money from your property than with a lifetime mortgage.
- More money will be available for release the older you are.
- It is possible to guarantee an inheritance for your beneficiaries.
- There are no payments to be made along the way, with the reversion company making its profits when the property is ultimately sold.
- Right from the start you will know what share of your property - although not its value - you will be leaving to your estate.
- Any rise in the value of the property will still benefit you unless you have sold 100% of the value.
- Extra cash advances can be taken, depending on the amount which you originally took.
The disadvantages of Home Reversion...
- The reversion company will pay you less than the current market value.
- Because the reversion company will want to buy from you with a big discount on the market value, these schemes are less suitable for people in their 60's. Usually you will not get the full market value of the share of the property you sell because you remain in the property, with an absolute right to live in it rent free (or for a nominal rent) for the rest of your life. Of course, therefore, the younger you are the longer it will take for the home reversion company to make their money back.
- As the reversion company will own a percentage of your home they will benefit from the increase in its value.
- As you are selling a percentage (or all) of your home, reversion plans cannot usually be reversed.
- Should you die within a short time after taking out the plan, you could have sold your house (or a share of it) very cheaply. Some home reversion schemes however, do offer a rebate to families if your death were to occur within the first few years.
- Reversion Companies do not have to agree to take any property and they may not agree to take yours for home reversion.
We will make sure that whatever your current needs and requirements, Bright Equity Release Solutions will work through all of the options and explain things simply and clearly, so that you have the confidence to make the right decision for yourself and for your family.
Bright Equity Release Solutions will charge a fee for advising on equity release products. The precise amount will depend on your circumstances but we estimate that it will be £595. This will not be charged until the money from the lender is released. Bright Equity Release Solutions will also receive a fee from the lender on completion of the loan to you. We offer an initial consultation for which no fee will be charged and there will be no obligation for you to proceed.