The website for mortgage advice of all sorts

Rookery Farm
Mile Hill
Porthtowan
Truro TR4 8TY

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One of the two main ways of releasing some of the increased value of your home, either as a lump sum or as income, in order to fund your retirement or improve your home is through a Home Reversion Plan, where part or all of the property is sold at the beginning of the arrangement.

Advantages

No interest is charged. This is a sale only transaction and no debt to the estate, either now or in the future, is involved. The reversion company makes all of its money when the property is sold.

You know at outset what share of your home (if not its value) you will be leaving to your family.

You continue to share in any rise in the value of your property (unless you have sold its entire value).

You can take extra cash advances, depending on the amount you originally took.

If you are a smoker or have a serious illness, you may be able to get a bigger payment.

Selling part or all of your home through a home reversion plan is a disposal for IHT purposes and may be offset against your estate, thereby reducing any potential liability for this tax.  However, a home reversion plan should not be taken out solely for IHT reasons.

Disadvantages

The home reversion plan company will buy at a discount to the current market value. The big discount at which they will want to buy makes these schemes more suitable for people in their 70s and upwards.

If you die soon after taking out a home reversion plan, you could effectively have sold off your house (or a share of it) on the cheap. Some home reversion plans give families a rebate if you die within the first few years of signing up. Consider an Open Options Property Reversion Plan if you want to be sure that as much as possible remains within your estate

Reversion companies can be choosy about the properties they take. For example, they don't like former Council properties, certain flats and registered smallholdings.

Once entered into, it is very difficult to get out of this arrangement. Be quite sure that this is what you want before you commit yourself. If you want to reserve the right to cancel at a later date, consider the Classic Property Reversion Plan.

With a home reversion plan there is no question of any debt to the estate, since you will have sold a percentage of your home instead of taking a loan secured on it. So there is no interest to be rolled up and no monthly payment to be made, other than a possible peppercorn rent. As before, you will remain responsible for maintaining the property. The amount you sell can be from any minimum percentage, usually 25% or £25000 - whichever is less, right up to a full 100% sale of the property. Since the lender may have to wait many years before they can realise the value of their share and since you will live rent free in the meantime, except for any peppercorn rent, what you will receive for the part you sell will be considerably less than its current value at the time of the transaction. The sale is therefore a clean cut transaction and as a result, you can not benefit from any increase in the property value relating to the percentage of your house that you have sold.

The actual capital released will vary with age and gender and whether it is a single person or a couple involved; the younger you are, the less you will receive for the part you sell. These schemes are more suited to older ages and generally they are only available in the age range 65 to 95. Typically, at 65 you would receive around 30% of its value, rising to 65% in your early 90s. Income can either be provided through the plan or by raising a lump sum to purchase a lifetime annuity.

Entering into a Home Reversion Plan has long term implications for both you and your beneficiaries and you should not proceed lightly with any form of releasing cash from the equity in your home, or without taking independent financial and legal professional advice. You should also consider the other alternatives, such as downsizing, sale and rent and a Lifetime Mortgage. If you fail to do so and make a mistake it will be difficult and expensive, if not  impossible, to rectify it and there are often better solutions available.

Equity Release chOices.....The Home Reversion Plan

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The Mortgage Shop is a retired IFA that no longer gives direct advice on or arranges Equity Release. Instead, it passes your enquiry to a fully qualified and licensed professional firm in your local area that will do this for you. This is a FREE referral; service to you, without any obligation, and you are completely at liberty to negotiate with the firm concerned the terms for their advice and services. The information provided is on the basis of our understanding of UK tax law and Inland Revenue practice and is subject to change.  This site is intended for persons aged 18 or over, resident or ordinarily resident, in the United Kingdom. email: bobstark@mortgagefor.me.uk

This is about Equity Release Plans. To understand the features and risks, ask for a personalised illustration. The actual APR rate available will depend upon your circumstances.

I recently succesfully challenged a DWP statement that a married couple were not entitled to  Pension Credits. As a result, their income was increased by almost £175 per month

The Mortgage Shop will be pleased to discuss your objectives and to put you in touch with an approved local specialist firm that arranges equity release.