Home reversion plans revolve around the idea that you sell a small part of your home and you get money in exchange for that portion sold. There is a big reason why reversion mortgages were popular: in the nineties & noughties, people were worried about not having as much cash as they should in their financial portfolio & wanted to protect their inheritance. This is why many people took out one of these schemes.
Home reversion has one main selling point which is the fact you get plenty of money for selling a portion of your home; more so than the more common lifetime mortgage schemes. As the old motto goes, cash is king and especially in times of austerity when you realise how important having cash is. Add a degree of tax free cash to your budget by using reversion mortgages.
If the maximum cash amount is the most important thing, it makes more sense to choose a plan that fits your needs. Choose a plan that allows you to get more capital for the equity in your home because you are swapping one investment for another. This is perfect if you need to raise a specific amount of money for yourself and your family.
Another advantage of home reversion is the fact that when you choose it, you are not penalised by how long you live because lenders do not focus on your lifespan when you are taking on the mortgage plan. These schemes are lifetime commitments & should be treated so accordingly.
One benefit of these plans that customers seem to like the most is the fact that you can stay in your home for the duration of your life, if that is what you want. This is perfect if you are someone who loves the neighbourhood you live in. You have spent years working on your home making it a place you love and now that you are retired you will want to continue in the same place. Home reversion mortgages do not penalise people who want to release liquidity from their homes. They actually reward you for the foresight of realising that you need to be financially liquid in order to enjoy the most out of life today.
Top tip: Choose mortgage plans if you do not mind losing out on gains that could be had from choosing a different mortgage or if you are happy to have the cash lump sum instead of another complicated mortgage plan. Don’t take any more than you actually need. Companies such as Bridgewater will allow you to take the funds in stages which can help further down the line.
One caveat to mention about this type of plan is that you actually sell a bit of your home. You have lifetime mortgage options where you can remain in your home; however, if you use a reversion plan you sell a piece of your home in exchange for remaining in that home for your lifetime and cash.
You can sell only the amount of your home that you need to in order to get the cash you need, or you can sell more than you need but take the funds in an instalment plan. You can also sell more of your home as you need the cash. The provider of this arrangement must sign a lifetime tenancy agreement with you. In exchange for part of your home, you obtain cash, but get to remain as long as you like.
Lifetime mortgage plans are where you do not sell your home, but gain a loan on the house. The loan is something you must repay in the end often by selling the house or having your beneficiaries pay off the mortgage so they can keep your home.
Home reversion schemes have changed since the nineties, which has kept these plans popular in the latest decade. Whether you want to keep your home or sell a portion of it to gain funds, it can be an important time to think about your options. Waiting until you are strapped for cash is going to create more worry and trouble. With the changes namely offering more transparency regarding reversion schemes, it is easier to understand the benefits and disadvantages.
Speak with a home reversion agent or solicitor to fully understand the requirements and benefits of the schemes. In doing so you will have a better idea of what fits your needs in order to get the cash you require to live comfortably.