Home Reversion Schemes
A reversion scheme is where you sell part or all of your property’s value to the reversion company in exchange for a lifetime lease, which guarantees your right to live in the property until you die, in addition to providing you with a cash lump sum to spend now.
The amount you receive is calculated on a number of variables including your age, sex and life expectancy. Older people can expect to receive more than younger people.
When the property is sold, the company receives the agreed percentage (or share) of the sale proceeds, regardless of whether the property has risen or fallen in value, or even stayed the same, since you took out the plan. You, or your estate, receive the other share of the proceeds (unless you had sold the whole property).
Should you choose to move, the reversion company will normally move with you and any proceeds from the sale will be split according to the percentage of property you still own. This is similar to when the property is eventually sold, usually after your death.
Advantages
- No ongoing repayments to make, the reversion company makes all of its money when the property is sold.
- You know at outset what share of your home (if not its value) you will be leaving to your family.
- You continue to share in any rise in the value of your property (unless you have sold its entire value).
- You can take extra cash advances, depending on the amount you originally took.
- If you are a smoker or have a serious illness, you may be able to get a bigger payment.
Disadvantages
- The reversion company will buy at a discount to the current market value. The big discount at which the reversion company will want to buy makes these schemes less suitable for those in their fifties or sixties.
- If you die soon after taking out a plan, you could effectively have sold off your house (or a share of it) on the cheap. Some schemes give families a rebate if you die within the first few years of signing up.
- Reversion companies can be choosy about the properties they take
