Home Reversion Plans and Lifetime Mortgages Explained

Both types of plans will give you access to the equity in your home without the need for you to sell it or move out. Here we explain some of the key differences:

Ownership: With a lifetime mortgage, you will retain full ownership of the property and would borrow money against the value of your home. Whereas, with a home reversion plan, you would sell a share of your home to a reversion company.

Repayments: With a lifetime mortgage, you do not have to make any repayments during your lifetime (some plans do allow voluntary payments), you are borrowing the money against the value of the equity within your home. The interest on the loan is compounded and will be added to the outstanding balance that you have borrowed upon repayment. The loan and the interest will continue to accrue until the loan is paid back when you pass away or go into long term care. With a home reversion plan, there are no repayments required because you would have sold a portion of your home to the reversion company when you took out the contract. The reversion company receives its share of the proceeds back at a point in the future when your home is eventually sold.

Interest rates: With a lifetime mortgage, the interest rate is fixed or variable, and can be either a fixed rate for the life of the loan, or a variable rate that can change over time. With a home reversion plan, there are no interest charges, as you will need to sell a share of your home to the reversion company at the point you take out the plan.

Inheritance: With a lifetime mortgage, your heirs may inherit the property, but the outstanding loan balance will need to be repaid out of the proceeds of the sale. With a home reversion plan, the amount of inheritance that can be passed on to your heirs may be reduced because you would have already sold a share of your home to the reversion company.

Flexibility: With a lifetime mortgage, you can usually choose between lump sum payments or regular income payments and can often choose to make voluntary repayments subject to the terms of the lender. With a home reversion plan, you may be able to choose between lump sum payments or regular income payments, but there is less flexibility overall because you would have already sold a share of your home to the reversion company.

There are both advantages and disadvantages to a home reversion plan, and it’s important to carefully consider these before deciding if it’s the right option for you. Here are some potential advantages and disadvantages of a home reversion plan:

Again, as with a home reversion plan a lifetime mortgage also has its advantages and disadvantages and you must carefully consider these before making the decision to take out a plan.

Fluent Money are specialists in lifetime mortgages, and we aim to find you a competitive deal that is suitable for your specific needs. Our qualified advisers will work closely with you to understand your circumstances and will work through the following steps with you:

Financial assessment: Your appointed adviser will conduct a thorough financial assessment to evaluate your current financial situation, income, expenses, and any existing debts. This assessment helps determine your eligibility for a lifetime mortgage and the amount you may be able to borrow.

Advice and recommendation: Based on the financial assessment, your appointed adviser will provide you with tailored advice and recommendations. They will explain the various lifetime mortgage products, interest rates, repayment options, and associated costs. They should also outline the potential risks and benefits involved.

Comparison and selection: Your adviser will compare different lenders and products to find the most suitable option for you. They will present you with the available choices, outlining the key features, interest rates and repayment terms.

Application and paperwork: If you decide to proceed with a particular lifetime mortgage product, your adviser will assist you in completing the application forms and gathering the necessary documentation. This may include proof of identity, property valuation, income verification, and legal documents related to the property.

Application submission and processing: Once you have selected a lifetime mortgage product, your adviser will submit your application to the chosen lender on your behalf. They will liaise with the lender throughout the processing period, ensuring all required information and documentation are provided promptly.

Valuation and legal process: The lender will arrange for a valuation of your property to determine its market value. Additionally, a solicitor or conveyancer will handle the legal aspects of the mortgage, including the property title and any necessary legal documentation.

Offer and acceptance: Upon completion of the valuation and legal process, the lender will issue a formal mortgage offer if your application is approved. The offer will detail the terms and conditions, including the loan amount, interest rate, and any additional requirements.

Completion and disbursement: Once you have received the independent legal advice and are satisfied with the terms, you can accept the mortgage offer. The mortgage funds will be disbursed to you or used to settle any existing debts, as specified in the mortgage terms.