Home reversion schemes did once dominate the equity release landscape. However, over the decades with further innovation and regulation of the equity release market their numbers have dramatically dwindled, almost becoming an extinct species. Here we discuss the rationale behind this and why home reversion UK plans still have a part to play in the equity release market.
Hoem reversion plans provide a lump sum or income. The amount you receive is not essentially a loan and there is no interest on the capital amount borrowed. The provider recovers the equity from the sale value of the house when it is finally sold. Home reversion plans have reduced in number over the years, and this is mainly because they have reduced in popularity.
The home reversion plan has some advantages, but they also have some distinct disadvantages. Home reversion can offer poor value under certain circumstances. Firstly, the provider buys their share at a discounted price and not at the current market value. Since you have sold the portion to the provider, even if the price appreciation is excellent, you will not benefit on the sold portion of the house.
When compared to the more rigid home reversion plans, many more flexible equity release options are now available to clients. These include, interest only lifetime mortgages which can be flexible enough to suit most clients. These equity release schemes also allow you to maintain a level balance when the plan ends, thus protecting the equity in your home.
Apart from being more flexible and having additional features and options, these equity release solutions also have the clear advantage of not involving selling any portion of the property. Time and declining trends have shown that people are uneasy about giving away ownership of their property, especially when it is full ownership.
Social attitudes towards savings and retirement are changing. People are looking for flexible and effective solutions to manage finances during retirement, while also being able to protect their savings and financial assets. Some new equity release solutions provide a more flexible alternative to older, more rigid, home reversion plans.
The decline in popularity of home reversion plans has led to the reduction in home reversion plan providers in the equity release market. This trend can be clearly illustrated with the help of the fact that in 2007, there were eight providers for home reversion plans, which reduced to four providers in 2010, with just three providers currently offering these products. Reducing home reversion providers has a direct correlation with the reduction in popularity for these equity release plans.
Tags:Equity Release Landscape, Equity Release Market, Equity Release Solutions, Flexible Equity Release Options, Home Reversion, Home Reversion Plan Providers, Home Reversion Plans, Home Reversion Providers, Home Reversion Schemes, Home Reversion UK, Home Reversion UK Plans, Interest Only Lifetime Mortgages