Home reversion

With a home reversion, you sell all or part of your home in return for a cash lump sum, a regular income, or both. Your home, or the part of it you sell, now belongs to someone else, but you are allowed to carry on living in it until you die or move out.

How does it work?

A company either buys your home or a part of it, or arranges for someone else to do so. In return you get a cash lump sum or an income. If you get a cash lump sum you may decide to invest this yourself to provide an income.

You’ll usually get between 35-60% of the market value of your house because the buyer allows you to carry on living there and cannot sell it until you die or move into care. The older you are when you start the scheme, the higher the percentage you’ll get.

You get the right to carry on living in the home under a lease. The terms of the lease will vary depending on which reversion you choose. You usually pay a nominal rent of say £1 each month, or you may have the choice of paying a higher rent in return for more money from the sale.

Is it right for you?

A home reversion can be a useful way of releasing equity from your home but you must be sure it is right for you.

If you do not need anyone else to benefit from the full value of your home, want a lump sum or income now, and want to stay in your home, a home reversion may be worth considering.

But you will no longer own your home (even if you only sell part of it). This means you will have to maintain the home while you live in it, so you may need to set aside money to do this. You'll also have to follow the terms of the lease and make regular rent payments. If this could be a problem, then a home reversion may not be suitable for you.

Home reversions are normally best suited to older people, perhaps over 70 or 75.

What does it cost?

You will have to pay:

• an arrangement fee for setting up the scheme;
• legal fees and valuation fees; and
• to maintain the property.

Questions to ask your adviser

• How will taking out a home reversion affect my income tax position, eligibility for state benefits and inheritance (including inheritance tax) when I die?
• If I want a regular income how will this income be achieved? Will the income be guaranteed? Will it be fixed or variable? How often and for how long will it be paid?
• What conditions does the home reversion put on me when I continue to live in the home?

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Top tips

1. Check what State benefits or other help you can get first.
2. Ask questions if anything is not clear.