There are two types of equity release schemes: home reversion plans and lifetime mortgages. While lifetime mortgages have soared in popularity in recent years, the demand for home reversion plans seems to have steadily declined. While home reversion, like any other financial scheme has some disadvantages, it also has some redeeming qualities.
The main feature of home reversion that repels most people is the fact that you lose part or full ownership of your home. Unlike a lifetime mortgage, a home reversion plan is not a loan, but a payment in exchange of ownership of a percentage of the house. But although you lose ownership on paper you still retain the right to live in the house rent free for the rest of your life, or until you move into long term care. This is achieved legally the home reversion provider providing a lifetime tenancy agreement for the customer.
The lump sum that you receive on home reversion is generally higher than a lifetime mortgage and is a tax free amount, and there are no restrictions on what you can do with this amount. This means that you receive the entire amount released by selling a portion of the house, without any tax cuts.
A roll up lifetime mortgage has compounding interest which often means that the debt can grow uncontrollably large. Having no control on repayment also means that your beneficiaries have no idea how much inheritance will be left for them in the estate. By selling a fixed portion of the house through a home reversion you can ensure that you protect your estate and your beneficiaries know exactly how much you are leaving behind.
For instance by selling 40% of the house, you can be sure that your beneficiaries will be receiving a full 60% of the property’s sale value upon your death or upon the end of the plan.
Contrary to popular belief, home reversion does allow you to move house in the future. Granted this can be a tricky process, especially as the percentage owned by the provider is subject to change depending on the value of the new house.
The fact is that there are more flexible home reversion plans available today than ever before. Bridgewater’s flexible release plan is the most flexible and customisable home reversion plan available today. It allows you to release equity as per your needs, and to guarantee future releases. The secured escalating release feature allows you to release a lump sum now and also set up annual releases for a fixed number of years. Some plans also offer early death rebates to beneficiaries, thereby allaying fears that a home reversion will prove to offer very poor value in case of early death.Tags:Bridgewater, Bridgewater Flexible Release Plan, Equity Release Schemes, Flexible Home Reversion Plans, Home Reversion Plans, Home Reversion Provider, Home Reversions, Lifetime Mortgages, Lifetime Tenancy Agreement, Long Term Care, Release Equity, Roll Up Lifetime Mortgage