What is a home reversion plan?

Full answer

Home reversion plans are one of the two main types of equity release available in the UK, alongside the much more common lifetime mortgage, and they work in a fundamentally different way. **How home reversion works** You sell a percentage (or all) of your property to a home reversion provider in exchange for a cash lump sum, a regular income, or a combination of both -- crucially, this is a genuine sale, meaning the reversion company becomes a part or full legal owner of your home. You retain a lifetime lease guaranteeing you the right to continue living in the property rent-free, or for a nominal rent, for the rest of your life (or until you move into long-term care). **Why the payout is less than market value** Because you continue living in the property rent-free for an unknown length of time, and the reversion company cannot sell or benefit from their share until you die or move out, the amount paid for the share sold is significantly below its full market value -- often a substantial discount, reflecting the provider's risk and the fact that they cannot access the property's value for potentially many years. **Home reversion versus lifetime mortgage** A lifetime mortgage (the far more common form of equity release) is a loan secured against your home, where you retain full ownership and the interest typically rolls up over time. A home reversion plan involves an actual sale of a share of the property, meaning you permanently give up ownership of that share, and any future rise in the property's value on the sold portion belongs to the reversion company, not your estate. **Impact on inheritance** Because part or all of the home is sold, the portion sold to the reversion company no longer forms part of your estate, which directly reduces what you can leave to your beneficiaries from the property's value -- this is an important consideration for anyone hoping to pass on the family home. **Minimum age requirements** Home reversion plans typically require a higher minimum age than lifetime mortgages, often around 60 to 65, reflecting the structure of the product and the provider's risk assessment around life expectancy. **Worked example** A 70-year-old homeowner sells a 40% share of their £400,000 home to a reversion provider for £64,000 (a discount reflecting that the provider cannot access the property's value until the homeowner dies or moves into care) in exchange for continuing to live there rent-free for life. **Practical tip** Use the Equity Release calculator and always take independent, regulated equity release advice before proceeding, since home reversion plans are less common than lifetime mortgages and comparing the true value of what you are giving up requires specialist guidance.