A home reversion plan is one of the most common forms of equity release that gives pensioners the opportunity to release equity from their home thus allowing them to obtain an additional income source. A reversion provider will purchase a percentage of or the entire home. In most cases, homeowners will not receive the full value of their home. They will only receive a percentage of the current market value of the home. This is normally between 20 and 60%.
In order for the home reversion process to be finalized, a lifetime tenancy agreement must be signed allowing homeowners to remain in their homes until they die. This is the main reason why the home reversion company does not pay the full market value of the property. During this process the applicant of the plan as well as the home reversion company require legal representation.
In most cases, legal representation comes in the form of equity release solicitors. These solicitors must apply the rules and regulations laid down by the Safe Home Income Plans or SHIP. The equity release solicitors also need to sign a certification on completion of the home reversion plan.
This certificate is a confirmation that the applicant is fully aware of the agreement they are entering into. It is to confirm that they are aware of the benefits, impacts, and consequences of the plan.
In most cases, homeowners are allowed to appoint their own solicitor. The only restriction is that the solicitor of the homeowner cannot be appointed by the home reversion company. The applicant and the lender cannot use the services of the same solicitor. Having legal representation during the process is very beneficial.
Homeowners will not only have someone to give them legal advice but they will also have someone to explain the meaning and implications of all related legal terms thus allowing them to fully understand what it is that they are getting involved in. Some solicitors are not members of SHIP and are not recommended. Only equity release solicitors who are members of SHIP are recommended since this is the only way to ensure that the solicitor will be able to best represent you.
These agents can explain in full detail the limitations and advantages of the reversion scheme. As with any financial product there are certain restrictions or limitations that might make home reversion schemes less appealing than lifetime mortgages.
The first disadvantage is selling all or part of your home. Once the home is sold, only the remaining portion can be sold to the reversion provider. It also makes it more difficult for any remaining family to live in the home, unless they are a part of the lifetime tenancy agreement.
A solicitor will tell you it is possible to add a person later to the agreement; however, the instance is very rare. Home reversion providers are in this business to make money. Holding on to a property longer due to the lifetime tenancy agreement is not in the provider’s best interest.
Buy-back options also exist should you wish to buy your home back. In this instance you will again need a solicitor on the SHIP membership list. In a buy-back situation the provider has the right to make you pay for any fees for the re-purchase as well as to pay a higher value based on current home values.
Any SHIP registered solicitor you hire should go over some of the other disadvantages of reversion schemes with you. They should also make the advantages apparent. One advantage that is often overlooked is upkeep of the home. You cannot let the home fall below the current standard, but neither do you need to worry about the provider requiring maintenance beyond normal upkeep of the home.
If you intend on using home reversion to update your home, fix the roof, or make some maintenance repairs you may not need to do anything later on. It is a small advantage compared to others; however, it can be important and a worry for someone about to sign an agreement.
The main advantage to this type of scheme is the ability to preserve some of the inheritance your children or beneficiaries will gain. To ensure proper terms are made for your beneficiaries it is necessary to have a home reversion solicitor on hand. The solicitor will do what they can to legally ensure the scheme is in your best interest and that of your beneficiaries when the rest of the home is sold.