What You Should Know About Home Reversion Plans
A home reversion plan is a type of release scheme whereby a home owner can sell a certain percentage of their home in exchange for a tax free lump sum or income or both. This scheme, just like many other retirement schemes, is available to people who are 65 years and above. There is a second type of equity release called the lifetime mortgage. It is best to understand both equity release schemes in order to see the advantages and disadvantages clearly.
The main feature of home reversion plan is that you can sell the entire house yet continue to stay in the house for the rest of your life without paying rent, and carry on your daily duties as usual. If you so choose, you can get a regular income on top. However, just like all equity release schemes there is a catch. You get to sell the house at a price lower than the current market value, since the equity lender has to wait for a while to actually exercise ownership rights. Additionally, you lose on any price increase since you do not actually own the house.
Many have compared this equity release scheme with the lifetime mortgage scheme. The difference is that in this scheme you actually sell your house and get the money, which will be lower than the current property value. The rest of the details are similar; for example, the amount you stand to gain from the scheme is heavily dependent on the applicant’s gender and age.
Lifetime mortgages require you to take out a loan on your home, which means you either pay interest during your lifetime or leave a mortgage to be paid upon your death or removal to a long term care facility.
The good thing about home reversion plans is that you can get a regular income or capital lump sum with no requirement to make any monthly payments. This leaves you with more income, thereby enabling you to achieve your retirement goals. Additionally, should you choose to have the payment made in lump sum, you get it tax free. You are also allowed to move out of the house whether you have taken a full or partial plan.
Once you move out of the home, it will be sold under the home reversion scheme unless there is a remaining member of the plan. For example, a married couple may not need an assisted living facility at the same time. Someone with an illness might be in nursing care, long term care, or hospice, but the remaining family member can be in the house. Under this type of the equity release schemes the tenancy will cover all those named in the agreement.
The fact that you can take a partial home reversion plan makes it possible for a home owner to raise money when needed, while retaining a percentage that can be passed down for inheritance. Additionally, one stands to benefit from market price rises. If you take a partial home reversion plan, you are allowed to buy back the part you sold. Though you, or your children, will pay a lot more than the part sold, it can be bought back. You can consider a home reversion plan as one of your retirement income options.
The home reversion provider is in the business to make money, eventually, off of the home. While it is a disadvantage to buy-back the home for more than you pulled out in equity, you at least have this option. There are any number of ways you or your surviving family might be able to afford to buy back the house later.
The key to this type of equity release is gaining money you can use in the now. Economies change, which can mean in a few years you are able to buy back the home or you no longer need to pull out money from the remaining equity. By starting off with a partial amount of property sold and using a monthly instalment scheme you can better position yourself to use just the funds required to make it through a tough time.
This article highlights the many facets of equity release schemes in the quest to aid retirees to a comfortable and prosperous golden age. It is important to find out more details about equity release schemes through a SHIP agent. Laws change for what is appropriate regarding these schemes. Additionally, as the market consumer changes, these schemes can change to become more or less beneficial to you in your older years.
