Home reversion
Everything you need to know about home reversion including how it works, how much it costs and whether its the right option for you.

Table of Contents
- How does home reversion work?
- What are the advantages and disadvantages of home reversion?
- How can I protect myself from the risks of home reversion?
- What does home reversion cost?
- What are the tax implications of home reversion?
- What are the differences between a home reversion plan and a lifetime mortgage?
- Questions to ask your adviser
- FAQs
How does home reversion work?
Home reversion is a financial arrangement that allows you to access the equity in your home while still being able to live in it.
How it works is simple-
You sell all or a portion of your home to a company in exchange for a cash lump sum or a regular income, and this amount typically ranges from 20% to 60% of your home’s market value.
Once the sale is complete, you continue to live in your home under a lifetime lease. You retain the right to stay in your home until you pass away, move into long-term care, or permanently vacate the property.
The percentage of your home’s value that you can sell increases as you get older, reflecting the shorter expected term of the lease. Some home reversion plans may require you to pay a monthly rental amount, which allows you to receive a larger initial sum.
It’s important to note that home reversion falls under the category of lifetime mortgage schemes, specifically designed for seniors looking to unlock the value tied up in their homes. Home reversion plans have declined in popularity over the years as newer, more flexible options have emerged, allowing individuals to access the value of their property without having to sell it.
Before making any decisions, it is crucial to thoroughly research and seek guidance from a financial advisor who specialises in equity-release schemes.
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What are the advantages and disadvantages of home reversion?
There are numerous advantages and disadvantages when it comes to home reversion plans, so it’s important to understand these before you make any decisions about your property.
Below, we have created a table to help you clearly see the pros and cons.
Advantages | Disadvantages |
---|---|
Home reversion plans come with no interest accumulation, so you don’t have to worry about the effects of this. | In comparison to traditional mortgages, home reversion plans are considered to be a higher risk when it comes to ownership, future value, and the impacts of the market. |
Allows you to remain in your home for the remainder of your life or until you want to permanently leave. | The language and contracts involved can be complex and difficult to navigate. Conducting thorough research may be time-consuming, and you may wish to seek the expertise of a financial adviser. |
The percentage of the sold property value increases with age, which can benefit individuals more concerned about maintaining their financial security than leaving an inheritance. | You will no longer fully own your home, which means you will no longer be able to benefit from any increase in the property value, and your ability to leave a substantial inheritance to your beneficiaries is impacted. |
If you are required to make monthly rental payments, you may receive a larger initial sum. | You are still responsible for property maintenance which can be costly. |
More suitable for older individuals as it meets their immediate financial needs and is generally considered to simplify their estate planning process as the arrangement is fairly straightforward. | Your freedom to make renovations to the property may now be limited and you could be required to have the approval of the home reversion company before you make any changes. |
How can I protect myself from the risks of home reversion?
Like the majority of financial endeavours, there are risks that come with home reversion, which we’ve outlined in the table above. However, there are ways that you can protect yourself and reduce the impact these may have.
Research reversion companies
Look for companies that are established, reputable, and stable. If they have a track record of reliability and customer satisfaction, you can feel at ease about the company you’re working with.
Understand the terms of the plan
You should take the time to read and understand the terms and conditions of the home reversion plan to ensure you’re doing something you definitely want to do. Check over the percentage of the property you’re selling and what the conditions of the agreement are in relation to any restrictions when it comes to renovations.
Seek professional financial advice
When it comes to your finances, the process is always going to be easier when you have a qualified professional to turn to when you’re uncertain about things. Seeking the advice of a financial adviser will put your mind at ease while the expert does the reading.
Their familiarity with financial jargon and home reversion plans will mean that they’re able to identify any terms or conditions that may be unusual or not accommodating to your financial goals.
The advice will be professional and tailored to you so you can be sure your financial wishes are at the heart of it.
What does home reversion cost?
When considering a home reversion plan, it’s important to understand the potential costs involved. Some of the expenses you may encounter include:
- Property maintenance: As the homeowner, you will still be responsible for maintaining the property, including repairs and upkeep.
- Monthly rental payments: Depending on the terms of the agreement, you may need to make monthly rental payments.
- Arrangement fee: The provider may charge an arrangement fee for the home reversion product.
- Adviser fees: You may need to pay a fee to the financial adviser for their advice and assistance in setting up the scheme.
- Valuation fees: A professional valuation is necessary to determine the value of your home for the reversion. It’s crucial to obtain an independent valuation and avoid accepting one suggested by the reversion company.
- Legal fees: It is recommended to seek independent legal advice to review the terms of the lease. You should appoint a solicitor of your choice rather than relying on the reversion provider’s appointed solicitor.
What are the tax implications of home reversion?
The main tax implications of home reversion are Capital Gains Tax (CGT)and Inheritance Tax (IHT).
Capital Gains Tax refers to the tax levied on a profit you make from the sale of an investment or a property. In the majority of instances, Capital Gains Tax will not apply to the sale of the portion of your property. If you own more than one property, implications of CGT are more likely to arise on the additional properties you own.
When you pass away, the remaining value of your property may still be subject to Inheritance Tax unless you qualify for certain exemptions, which you should consider during your estate planning process. The portion of your property that you sell will no longer be considered to be a part of your estate, so that won’t be subject to IHT.
What are the differences between a home reversion plan and a lifetime mortgage?
There are a few main differences between a home reversion plan and a lifetime mortgage. We have depicted these clearly in the table below.
Category | Home Reversion | Lifetime Mortgage |
---|---|---|
Ownership | You sell all or a portion of your home to a company, no longer owning the portion sold. | You borrow money against the value of your home and retain ownership. |
Repayment | No repayment is required, as the home reversion company receives their portion of the home value upon your death or when the property is sold. | Repayment is required, either through regular payments or at the end of the mortgage term. |
Inheritance | The portion of the property sold is no longer considered part of your estate, so it won’t be subject to Inheritance Tax. | Your estate may be subject to Inheritance Tax. |
Property Value Appreciation | You won’t benefit from any increase in the value of the portion of the property sold. | You may benefit from any increase in the value of your property. |
Flexibility | Less flexible, as you are restricted from making changes to the property without the approval of the home reversion company. | More flexible, as you retain ownership of the property. |
Risk Distribution | Higher risk for the home reversion company, as they only receive their portion of the value upon your death or when the property is sold. | Lower risk for the lender, as they can repossess the property if payments are not made. |
Eligibility Criteria | Typically available to older individuals, as it meets their immediate financial needs. | Available to a wider range of individuals, as it is a more traditional mortgage product. |
Questions to ask your adviser
When discussing home reversion with your financial adviser, don’t hesitate to ask questions to ensure you have a clear understanding of the scheme and its implications. Here are some important questions to consider:
- Transferability: Can the home reversion scheme be transferred if you decide to move in the future?
- Tax and benefit implications: How will entering a home reversion plan affect your Income Tax position and eligibility for benefits?
- Conditions of the lease: What conditions does the home reversion impose on you for continuing to live in your home?
- Regular income: If you desire a regular income, how will it be achieved? Is the income guaranteed, fixed, or variable? How frequently will it be paid, and for how long?
Remember, seeking personalised advice from a qualified financial adviser who can guide you based on your specific circumstances and financial goals is crucial if you’re thinking about home reversion.
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FAQs
What is the minimum age for home reversion?
The minimum age for home reversion is usually 60 or 65 depending on the provider. If you opt for a lifetime mortgage, which is now the more popular option, the minimum age tends to be 55.
Who arranges a home reversion?
A fully regulated firm with a team of mortgage brokers will most likely arrange a home reversion if you were to opt for such. Before proceeding with any firm, it’s always best to check whether they are authorised and regulated by the Financial Conduct Authority (FCA).
Is it a good idea to get a home reversion plan?
It’s a good idea to get a home reversion plan if you need money right now, you want to stay in your property and you don’t need to pass its full value onto any dependants/family.

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