Home reversion plans explained

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:

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.