Which Equity Release Scheme Will Release the Most: Home Reversion or Lifetime Mortgage?

Deciding which equity release scheme works best for you, depends on your individual needs and circumstances. There are no fixed rules as to which type of equity release is better than the other, as what works for one person may not work as well for someone else. For instance, protecting the equity in a home for beneficiaries may be more important to someone than having no monthly payments; while having no monthly obligations may be more important to someone else. Having said that, it is possible to generalise about which type of equity release is capable of releasing more cash.

The main reason why home reversion equity release schemes are able to release more than interest only lifetime mortgages is that they are available to applicants over the age of 65 years, while interest only lifetime mortgages are available to applicants over the age of 55 years. As a general rule, when it comes to a loan or a commercial investment, a lender is prepared to offer more for your business the shorter the expected term of the loan or investment is.

That is, the more quickly the lender can recover their investment, the higher they are prepared to invest. In general, applicants aged over 65 years can be said to have a shorter life expectancy than those aged 55 years. This is the principal reason why home reversion plans are, generally speaking, able to release more than interest only lifetime mortgages.

Most home reversion providers allow you to make further releases of equity until 100% of the property is sold. Although the amount you receive in exchange for the ownership from the provider is heavily discounted, being able to release 100% of the property still means that you are often able to receive more from a home reversion scheme than a lifetime mortgage.

The amount released with home reversion is tax free, which means that you receive the entire amount from the provider. That you can release more with a home reversion equity release plan than a lifetime mortgage can be particularly significant to those who have an unpaid debt or multiple debts that need to be repaid.