01 Jan 2024

Home reversion plans explained

If you’re a property owner in later life, you’ve probably seen the value of your home go up.

You might want to boost your retirement income by releasing some of that equity without moving house. Home reversion schemes and lifetime mortgages are two ways you can do that.

Couple in a kitchen

How much could you release?

Interested in equity release? Find out how much you could release with our quick and easy to use equity release calculator.

What is a home reversion plan?

Home reversion plans let people sell between 25% and 100% of their home in return for a cash lump sum, a regular income or both, while still living in it. They’re usually available once you’re aged 60 or older.

In practical terms, it’s like becoming a tenant in a home you used to own. You might even have to pay rent to your provider. It can also affect your entitlement to any means-tested benefits.

And you’ll have sold some or all of your home at less than its market value. That might impact you from benefiting from future price rises, and could cut down the inheritance you can leave for your loved ones. 

How do home reversion schemes work?

When you take out a home reversion scheme, your provider will take ownership of their share and pay you however you’ve agreed. Some reversion plans are portable, so you can still move house if you want to.

Your provider won’t take any money out of your home until the whole property goes on the market and sells. That usually happens when you die, or move into long-term care. You’ll never have to pay back more than the value of your home.

If you’re older or in poor health when you take out a home reversion scheme, you might get a better deal. That’s because you’ll probably stay in your home for a shorter time, so your provider is taking less of a gamble on how house prices might change.

Home reversion schemes vs lifetime mortgages

Lifetime mortgages are much more popular than home reversion plans, making up most of the equity release market. But a home reversion scheme might still be a better choice for you, particularly if you’re older or in poor health.

Your financial adviser can talk you through both options and help you make the right decision for you. This chart explains the basic differences and similarities between the two types of scheme:

With home reversion schemes: With lifetime mortgages:
  • You sell 25% to 100% of your home
  • Your lender pays less than the market value
  • You can usually get them when you’re 60 plus
  • Your lender doesn’t charge any interest
  • If you’re older or in poor health, you might get a better rate
  • We don’t offer them
  • The amount you can borrow will depend on factors such as your age. This is usually around 20% to 60%
  • It's a loan secured against your home
  • You can get them when you’re 55 plus (or 50 plus with our Payment Term Lifetime Mortgage)
  • Your lender will charge interest on your loan
  • Your age and health may affect the rate you can get
  • We do offer them

 

With both home reversion schemes and lifetime mortgages:
  • Any cash you get will be tax free
  • You can take your money as a lump sum, regular payments or both
  • You won’t end up in negative equity
  • If you choose a portable plan, you can still move house
  • Depending on the product you choose, you might have to make payments to your lender
  • You can choose to pay back your loan or buy back your home, but this can be costly
  • There might be an impact on any means tested state benefits you’re getting
  • You’ll have less to leave as an inheritance for your loved ones
  • You have to take them out through a financial adviser

 

How much could you release?

Interested in a lifetime mortgage? Find out how much money you could release from your home with our quick and easy lifetime mortgage calculator.

What’s next?

We hope that’s helped you understand how home reversion works, and why lifetime mortgages are usually a better choice. If you want to find out more, we recommend a chat with your financial adviser (if you don’t have one, you can find one at Unbiased) or our own advice service.

Related articles

Image of family

Is equity release a good idea for you?

Although the market now offers greater flexibility, more choice and increasingly competitive rates, myths around equity release remain. Here we set the record straight and explain how equity release can help boost your finances.
Women on laptop

Frequently asked questions about equity release

Are you considering equity release? We answer the most frequently asked questions about equity release to help you make the best decision for you.
Teaser image Downsizing.jpg

Downsize or equity release?

Here are some of the things to think about if you’re considering downsizing, or taking out a lifetime mortgage, a form of equity release.

Sign up to our newsletter

Subscribe to our newsletter for tips on how to make the most of your money now, and in the future.

Our team hand picks a selection of our latest articles and stories that we think you’ll find interesting. Subscribe to our newsletter and have the opportunity to enter exclusive prize draws, be invited to share your own stories, and be kept updated with tips and tricks to help you manage your finances.

By providing your email address you're giving consent for us to send you emails with news, information and offers on the products and services provided by Legal & General. Legal & General take your privacy seriously; this is why we never share your personal details with anyone else for their own marketing purposes. You can opt out of these emails at any time. Read our privacy notice to understand how we process your information.