What Is A Home Reversion scheme

A Home Reversion scheme allow you to sell all or part of your home to a lender. The lender will then pay out a cash lump sum or offer a monthly income.

No interest is paid on the loan but when the property is sold the lender will take a percentage of the value. This percentage depends on many factors, the important one being your age. The older the more money you’ll receive because statistically you have less time to live.

Under these schemes you sell the legal ownership to the company and become a tenant, but you are still responsible for the property, bills and other outgoings relating to it. But even though you are now a tenant you are guaranteed the right to live in your home for the rest of your, or your partner's life. This is offered by what they call a Lifetime Lease.

Different Types of Reversion Schemes

There is no standard Reversion Scheme, policies differing from provider to provider. Also, as competition increases in the Equity Release market new ideas and twists to the different schemes are being offered all the time.

It's therefore important that people interested in Equity Release do as much homework as possible and check out the different providers. Special attention should be placed on the costs and small print.

Examples of different policies include –

• Some lenders will only provide the capital released in the form of income, by means of an Annuity
  
  
• Others may give you the choice of having a lump sum or both
  
  
• Some schemes allow you to benefit from an increase in property values while others do not
  
  
• Some will allow you to sell 100% of your property, while others limit it to only 90%

Interest Only Mortgages

This is not an equity release scheme but another way for the over 60s to capitalise on the built-up equity in their homes.

• There are several Building Societies and Banks which are prepared to offer ordinary interest only mortgages to retired people. This allows capital to be released in the form of a cash lump-sum
  
  
• Interest only mortgages mean that you only repay the interest and not the capital to the lender. The monthly repayments can therefore be relatively affordable
  
  
• The amount you can borrow under such schemes are based on your incomes including pensions and not your age or life expectancy

Interest only mortgages can be useful as a temporary measure for people who would prefer a specialist scheme such as Reversion or Cash Release, but are too young to qualify (under 60 – 65). Once you reach the right age you can replace the interest only mortgage thus stopping the need to make monthly repayments.