A home reversion is when you sell all or part of your home in return for a lump sum payment, a regular income or a split of both. The part of your home or all of your home which you sold will now belong to the buyer.
You will still be allowed to keep living in your house without paying any rent until you die or move out. Depending on your age and medical conditions you might be able to get a larger lump sum upfront. By this we mean the home reversion company will offer you a value closer to the true market value of your property.
How does a home reversion work?🚩
A home reversion company will buy out all or part of your home for a large lump sum or a regular income.You are allowed to continue living in your home till you die through a rent free lifetime lease.
With a home reversion plan the buyer does not buy your home at the full value but rather pays between 30 to 60% of the property value. The older you are at the beginning of your home reversion scheme, the higher the offer you receive. A home reversion company will offer you a value close to thetrue value of your home the older you are.
This is because the home reversion company allows you to live in the property rent free after they have purchased some or all of your property. The home reversion company can also not sell your property as long as you are alive.
What are the costs of a home reversion scheme💲
Some of the costs you will have to pay include:
- Adviser fee for advice on the scheme. You can find independent financial advisers here
- Home valuation fee
- A product arrangement fee
- Legal fees You will need a lawyer to ensure the agreement you have is in your best interest.
- You will need money to maintain the standards of your property
What you should consider when thinking of a home reversion scheme😏
Home reversions aren't right for everyone and this is why independent financial advice is key.
- It's a good way to get an income to supplement your pension but it should be right for you.
- Financial and legal advice are key when taking out a home reversion plan
- You should consider the tax implications.
- You should ask if you could transfer the home reversion if you want to move property
- Home reversions are classified as high risk
- Home reversions can have implications on your inheritance
- Home reversions are a good way of getting a regular income after you retire.
- You have to stick to the terms of your lease
- You may still be required to pay ground rent or chief rent if your property is a leasehold. This is regardless of if you still own part of your home or none via the home reversion scheme.
- Will your regular income be guaranteed and for how long? Will it be fixed or variable?
- You still have to maintain your home so you need to budget for this
- You might be required to pay an annual sum if you own a freehold
- Home reversions are usually suited for people over 70
- What requirements will you have to keep while you live in your home