The two common misconceptions about home reversion schemes are that you are required to sell 100% of your property to the loan provider, and second, that you cannot release the full amount of equity from your house. Both of these are false.
It is not mandatory to exchange 100% of your house to the equity release provider, however, should you wish to, there are home reversion plans that allow you to do exactly this. Most home reversion providers have plans with options ranging from 25% to the full 100% exchange of the property in return for an amount of tax free cash.
Home reversion schemes are a type of equity release, whereby you can release or tap into some of the value that is built into your home. However, unlike lifetime mortgages, home reversion involves transferring ownership of the portion of the house to the provider in an exchange of equity, on which you pay no interest whatsoever.
Like lifetime mortgages, home reversion plans also end only when the house has been sold, and this can only be done when the client has died, moved into long term care, or has authorised an early sale. Although to transfer ownership of your house, you still retain the right to live in your house, and this is guaranteed by a lifetime tenancy.
The viability of home reversion plans depends on several factors, and mainly hinges on the projected appreciation of the property in the expected term of the plan. The provider must work out how much they can afford to pay in exchange for a certain share of the house, and this depends on how much their share will be worth when the house is sold, which in turn depends mainly on the life expectancy of the applicant.
How much equity you can get in exchange for a portion of the house depends on the provider’s calculations. Home reversion providers can work out how much their share is worth depending on the age of the applicant, the gender of the applicant and the current valuation of the property. Whether it is a single or a joint application also has a bearing on the outcome. Generally, the shorter the expected term of the loan, the quicker the home reversion provider can expect their money back, and the more money you can release.Tags:Equity Release Provider, Home Reversion, Home Reversion Plans, Home Reversion Scheme, Home Reversion Schemes, Joint Application, Lifetime Mortgages, Lifetime Tenancy, Loan Provider, Long Term Care, Type of Equity Release