Home Reversion Schemes - What Are They?

A Home Reversion scheme allow you to sell all or part of your home to a lender, usually a company. They will then pay out a cash lump sum, a monthly income or a combination of the two.

Interest is not paid on the loan but the lender will take a percentage of the value of the house when the property is eventually sold. The percentage will depend on several factors, including how old you are. The greater your age then the more money you will receive.

You sell part or all of the ownership of your home to the company, under these schemes, and you become a tenant However, you remain responsible for the property, its bills and maintenance. Even though you are tenant, you are guaranteed the right to live in your home for the rest of your or your partner's life under a Lifetime Lease.

Types of Reversion Schemes

Policies are different from provider to provider and there is no standard Reversion Scheme. Competition in the Home Reversion market is leading to new ideas and different schemes are being offered regularly.

It is most important that people interested in Home Reversion do as much homework as possible. Investigate the different providers and pay attention should on the costs and small print.

Some examples of different policies

* Different lenders give you the choice of having a lump sum, income or a combination of both.
* Some schemes allow you to profit from any property value increases while others may not do so.
* Some lenders will only provide the equity released by way of income. They may use an annuity to do so.
Interest Only Mortgages
Rather than a Home Reversion Plan, this is a different way for the over 60s to benefit from the built-up equity in their homes.
* Quite a few Building Societies and Banks which are prepared to offer ordinary interest only mortgages to retired people. This means that capital can be released in the as a cash lump-sum.
* Interest only mortgages mean that you only repay the interest and but not the capital to the bank or building society. This reduces the monthly payments which can become relatively affordable.