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What is a home reversion plan?
A home reversion plan is a type of equity release product where a homeowner aged 60 or over sells a fixed percentage of their home to a provider in return for a cash lump sum, while retaining the right to live in the property for the rest of their life or until they move into long-term care.
A home reversion plan isn’t a loan. There’s no interest to pay and no monthly repayments. Instead, the reversion provider receives their share of the property’s value when it’s eventually sold.
Home reversion plans now make up less than 1% of the overall market. For those who do consider them, they can have a significant impact on finances and future plans. In this guide, you’ll learn how home reversion plans work and the key pros and cons to consider.
How do home reversion plans work?
You sell a percentage of your home to a specialist provider, at less than its market value. The percentage sold is agreed in advance and doesn’t change over time.
In return, you receive a lump sum cash payment or regular payments.
You continue to live in your home under the terms of a lifetime lease. You're usually responsible for maintaining the property and keeping it insured.
The plan ends when the last homeowner either passes away or moves into long-term care. At that point, the property is sold, and the proceeds are split between the provider and your estate according to the ownership shares agreed at the start.
Key information: With a home reversion plan, you are selling ownership of your property, not borrowing money. There is no interest charged and no debt that increases over time.
How much money can you release with a home reversion plan?
With a home reversion plan you should expect to receive less than the actual value of the portion you are selling. For example:
- Your home is worth £300,000
- You sell 50% to a home reversion provider
- You receive £105,000
- When you sell your home, the provider will receive 50% of the sale price, regardless of how much the value of the property changed over time.
This is an illustrative example and not a guarantee of what you might get.
The amount offered depends on factors such as:
- The age of the youngest homeowner
- Your health
- The value of your home
- And the percentage of the property being sold
Older applicants might see higher amounts offered, as the provider would expect to see the plan run for a shorter period of time.
The offer being below market value reflects the fact that the provider may have to wait many years before receiving their share of the property’s value, while allowing you to continue living in the home for life.
Who can take out a home reversion plan?
Different providers set their own eligibility criteria, but home reversion plans are typically available to UK homeowners who:
- Are aged 60 or over
- Own their home outright or can repay an existing mortgage using the proceeds
- Live in the property as their main residence
- And meet minimum property value requirements
For joint applications, providers will base eligibility on the age of the youngest homeowner.
Why might you choose a home reversion plan?
Some homeowners might consider them because they can offer:
- No interest, so no growing debt to repay
- Certainty over the percentage of the home sold
- The right to continue living in the home, sometimes rent-free
- The option to only sell part of the property, retaining the rest for inheritance purposes
These features can give peace of mind and help homeowners to plan their future retirement needs with confidence. However, home reversion plans make up less than 1% of the overall equity release market, so it is not a very popular option.
What are the risks of a home reversion plan?
Home reversion plans carry significant risk and require careful thought. Risks can include:
- Once entered into, it can be difficult and expensive to buy back the share of the property that was sold.
- Giving up future house price growth on the share sold
- Reducing the value of your estate and any inheritance you leave
- Limited flexibility if your circumstances change
- Possible impact on entitlement to means-tested benefits
- These factors can mean that the cost of a home reversion plan can be higher than they first appear.
Home reversion plans vs. Lifetime Mortgages
A home reversion plan is often compared to a Lifetime Mortgage (a different equity release product). The table below highlights some of the key similarities and differences.
| Home reversion plans | Lifetime Mortgages | |
| Method of releasing money | Selling all or some of your home | A loan secured against your home |
| Homeownership | You no longer own all of your home | You retain full ownership of your home |
| Interest charged | No interest | Interest is charged and usually rolls up over time, but a borrower can make payments if they wish |
| Monthly payments | No monthly payments but some providers might charge rent | No monthly payments required, though some plans allow voluntary payments |
| Right to stay in your home | Guaranteed for life under a lifetime lease, or until you move into long-term care | Guaranteed for life, or until you move into long-term care |
| Amount you can access | Usually a discounted amount compared to market value | Based on loan-to-value limits, usually increasing with age |
| Impact of house price growth | You do not benefit from price growth on the share sold | You benefit from house price growth, though interest roll-up reduces remaining equity |
| When does the plan end? | When the last homeowner dies or enters long-term care | When the last homeowner dies or enters long-term care |
| What happens when the plan ends | Property is sold and proceeds are split by ownership share | Loan plus interest is repaid from the sale of the property |
| Inheritance impact | The amount you can leave as an inheritance is reduced | The amount you can leave as an inheritance is reduced |
| Flexibility | Limited once the plan is in place | Generally flexible, with a wide range of features |
| Availability in the UK | Very limited, with few providers | Widely available and the most common form of equity release |
What are the alternatives to home reversion plans
Home reversion plans are only one way of accessing money invested in your home. Depending on your situation, other options may let you access money without selling part of your property.
These may include other forms of later-life lending or using savings and investments. Each option has different implications for home ownership, inheritance, and long-term financial security.
Things to consider before choosing any equity release product
Before deciding whether equity release is right for you, it’s important to consider:
- How long you expect to stay in your home
- How releasing equity could affect your future care needs
- And the impact on your estate and beneficiaries
Equity release is a long-term decision and isn’t right for everyone. If you’re unsure, speak to an equity release adviser to explore your options.
At a glance: home reversion plans
- Available to homeowners aged 60 or over
- Sell some or all of your home to a provider
- Receive less than its market value in exchange for a lifetime lease
- Provider claims their percentage of the home’s value when it is later sold, when the last homeowner dies or enters long-term care
Frequently asked questions about home reversion plans
Is a home reversion plan the same as equity release?
A home reversion plan is a type of equity release product, but it works differently from a Lifetime Mortgage, the more common option.
Do I still own my home with a home reversion plan?
You only keep ownership of the percentage of the property you don’t sell. If you chose to sell 100% to a provider, then you would no longer own any of your home.
Is a home reversion plan safe?
There is always an element of risk when considering something like a home reversion plan. Seek qualified advice to find out if it would work for your circumstances.
Can I move house after taking out a home reversion plan?
Some plans let you move, but this is usually subject to the new property meeting the provider’s criteria.
What happens when I die?
The property is sold, and the proceeds are split between the provider and your estate according to the agreed ownership shares. If the product was taken out jointly, the plan will not need to be repaid until the last homeowner dies or enters long-term care.
What if I need more money in the future?
If you only sold a percentage of your home, then you could approach your provider and enquire about selling more. However, if you sold all your home then there won’t be an opportunity to get more money. That’s why expert advice is essential.
Do Royal London Equity Release Advisers consider home reversion plans?
Home reversion plans do not form part of Royal London Equity Release Advisers considerations.
These plans typically involve selling property at a discount compared to its market value. While there’s no interest to pay, this can result in poor value over the long term.
Homeowners also give up any future increase in the value of the share they sell and will reduce the value of their estate.
Home reversion plans can be hard to reverse and are now available from only a small number of providers.
More equity release information
“Royal London Equity Release Advisers” is a trading name of Responsible Life Limited. Responsible Life Limited uses Royal London branding under licence from Royal London Marketing Limited. “Royal London”, the “Royal London logo” and “Royal London Equity Release” are registered trade marks of The Royal London Mutual Insurance Society Limited. Royal London Marketing Limited and The Royal London Mutual Insurance Society Limited do not provide regulated mortgage advice.
Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference 610205. Registered in England and Wales under company number 07162252. Registered office: Princess Court, 23 Princess Street, Plymouth PL1 2EX.
Responsible Life Limited is a wholly owned subsidiary of the Royal London Group who may benefit if you choose to take regulated mortgage advice. Being a wholly owned subsidiary of the Royal London Group does not alter Responsible Life Limited’s regulatory responsibilities.
If you choose a mortgage with required payments during your lifetime then your home may be repossessed if you do not keep up with the payments. Borrowing with a Lifetime Mortgage or Retirement Interest-Only Mortgage will reduce the value of your estate. Receiving a cash lump sum may also affect your entitlement to means-tested benefits. Think carefully before securing other debts against your home.
To understand the features and risks, ask for a personalised illustration. Your adviser will talk through the setting up costs of a mortgage. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,890.