Home Reversion schemes

JEB_3

My parents are considering releasing some of the equity in their house by home reversion. Basically, this means they can release say 20% of the current value of the property now and will pay back 20% of the then value of the property when they pass away or go into a home. Has any one got any experience of these schemes? can anyone recommend a reputable company that I could contact about it?

defender_of_the_weak

are they sure they really want to do this? Home reversion is generally suitable for those who have no alternative way of raising finance and when the sums are done at the end it can work out quite expensive.

I think Scottish Widows or Amicable do a version of this that from memory was quite straightforward in the paperwork also there is a company called In Retirement Solutions based in Cardiff who are very thorough in their approach.

Key issues to consider:

If they are using the reversion to generate income then they should probably avoid purchasing an annuity as this dies on their death, theoretically they could give away 20% of the property value for a short term income.

Any additional income roll-ups within the plan.

They will only get a fraction (in todays terms) of what they sign over so may receive a lump sum of say £25,000 but give away £60,000 of the property value.

As well as potentially seeing an IFA, although these are quite a specialised area, they should also check with their solicitor as to the terms and conditions before signing.

EdInvestor

Have they considered selling their home and buying a smaller one, or the same size in a more downmarket area and getting some cash that way?

"Trading down" is a much better idea than either home reversion or equity release.

margaretclare

Hi

We did a 'lifetime mortgage' in 2003, this released 25% of equity on a property valued @ £140K. We did this because we wanted to pay off the original mortgage which would have gone on until we're 83 and we thought we could find a better use for the £250 or so every month. The interest rolls-up and is paid off on the death of the second of us. We also took the opportunity to get the deeds registered in joint names rather than in my name alone.

Downsizing wasn't really an option for us because there's not much you can downsize to from a 2-bedroom bungalow.

But what we did was not home reversion - my understanding of this is that you 'sell' part of your home to a company and still live there. This is different from the lifetime mortgage.

I would strongly suggest that your parents look at the SHIP website (https://www.ship-ltd.org) - SHIP means safe home income plans. And take proper detailed advice from an IFA.

Best wishes

Aunty Margaret

dunstonh

Check the IFA is a specialist in this area if you go down this route. Personally i will not touch home reversion schemes as they are a high risk advice area and not worth the hassle. Many other IFAs take the same view.

They are on the FSA "watch list" for potential mis-selling.