Understanding Home Reversion Plans
What Is a Home Reversion Plan?
A home reversion plan is a type of equity release that allows you to unlock some of the value in your home by selling part or all of it to a specialist provider. In return, you receive a tax-free cash payment.
This can be paid as a single lump sum, as a series of regular payments, or as a combination of both. Once the plan is in place, you retain the legal right to live in the property for the rest of your life, without paying rent, under a guaranteed lifetime lease.
How home reversion works
Selling part or all of the property
When you take out a home reversion plan, you sell a fixed percentage of your property’s value to a provider. This can be anywhere from 20 percent to 100 percent, depending on your needs and eligibility. Once agreed, that percentage never changes. The provider becomes a legal co-owner or sole owner of the property depending on the share sold.
The amount you receive is significantly below market value. This reflects the fact that the provider cannot realise their share until the home is sold, may not receive income in the meantime, and carries the risk that you may remain in the home for decades.
Receiving the proceeds
You can choose how to receive the funds released. Some homeowners prefer a single upfront lump sum to cover a large expense, such as repaying a mortgage or funding home improvements. Others opt for regular payments to top up retirement income. It is also possible to take part as a lump sum and part as income. The total amount available is determined at the outset based on your age, health, and the share being sold.
For example, if your home is worth £300,000 and you sell 50 percent to a provider, you might receive between £60,000 and £90,000 depending on your age. That 50 percent share will belong to the provider and entitle them to 50 percent of the final sale proceeds, regardless of how much property prices rise or fall.
Retaining the right to stay in your home
Even though you sell part or all of your home, you retain the right to live in it for life. This is secured through a lifetime lease, which is written into the contract and ensures you cannot be evicted or charged rent. You must maintain the property as your main residence and keep it in good condition. If you move into long-term care or pass away, the home is sold, and the proceeds are split according to the ownership shares.
Eligibility criteria
Age restrictions and health conditions
Home reversion plans are generally only available to homeowners aged 60 or 65 and over. Some providers have a minimum age of 70. This is because the value offered is based on life expectancy and the likely duration of the plan. Applicants in poor health or with a shorter life expectancy may be offered more generous terms, as the provider expects to recover its share sooner.
For example, someone aged 85 with significant health conditions may receive a higher cash payment for the same share of their home than a healthy 65-year-old would.
Property requirements
The home must be your main residence and typically must be owned outright. If you still have a small mortgage, it may need to be cleared using part of the proceeds. The provider will assess the property’s value, location, and condition. Some types of property, such as ex-local authority flats or homes with short leases, may not be eligible. The provider must also be satisfied that the property will be marketable in future.
When home reversion might be suitable
A home reversion plan may be suitable for older homeowners who:
- Want to release tax-free cash but avoid building up debt
- Do not need or wish to preserve the full value of the property for inheritance
- Prefer the certainty of a fixed ownership split over time
- Are older or in poor health and may receive a higher payout
For example, a single homeowner aged 80 with no dependants and limited retirement income may prefer a home reversion plan to avoid interest charges and secure the right to stay in their home without the pressure of debt repayment.
Cases where it may not be appropriate
Home reversion plans are not suitable if you want to retain ownership of your property, benefit from future increases in house prices, or keep your options open for moving later in life. They are also less suitable for younger retirees, as the amount offered will be lower, and the long-term commitment may outweigh the financial benefit.
In such cases, a lifetime mortgage may offer more flexibility, including the option to repay interest, move house, or draw money gradually through drawdown.
Key advantages and disadvantages
Benefits of home reversion
- No interest or repayments: There is no loan involved, so no interest accrues. You never owe money to the provider.
- Guaranteed right to stay: You remain in your home for life, protected by a lease that guarantees occupancy without rent.
- Fixed share arrangement: The percentage of ownership you retain is agreed at the outset and does not change over time, providing clarity for inheritance planning.
Limitations and risks
- Loss of ownership: You permanently give up part or all of your home. If property values rise, the provider benefits from the increase on their share.
- Lower than market value: The amount you receive is substantially less than the current market value of the share sold.
- Impact on inheritance: Only the retained share remains in your estate. Selling the entire home means your beneficiaries will not inherit any part of it.
- Limited ability to move: Some providers allow you to transfer the plan to a new home, but only if the new property meets strict conditions and is approved in advance.
Regulation and industry oversight
Home reversion plans are regulated by the Financial Conduct Authority. This means providers must be authorised to offer or advise on the product and must meet strict rules around conduct, disclosure, and suitability.
Providers who are members of the Equity Release Council must meet additional standards, including:
- Guaranteeing the homeowner’s right to stay in the home for life
- Ensuring the agreement is explained in clear and transparent terms
- Requiring all customers to receive independent legal advice
Legal advice requirement
Legal advice is mandatory for all home reversion plans. You must instruct a solicitor to act on your behalf, independently of the provider. The solicitor will review the terms, explain your rights and obligations, and ensure you fully understand the permanent change in ownership. They will also review the lease terms, which will outline your responsibilities for insurance, maintenance, and use of the property.
How inheritance is affected
The amount of the property you retain remains part of your estate and will pass to your beneficiaries when the property is sold. The sold portion does not. For example, if you sell 70 percent and keep 30 percent, your estate will receive 30 percent of the eventual sale proceeds.
If you sell the entire property, there is no housing equity left to pass on. For families expecting to inherit the home, this can have a significant impact.
Effect on means-tested benefits
Receiving a lump sum or regular income may affect your eligibility for means-tested benefits such as:
- Pension Credit
- Council Tax Reduction
- Any other benefits where savings or income thresholds apply
For example, if the amount released takes your savings above £10,000, your entitlement to Pension Credit may be reduced. If it exceeds £16,000, eligibility may end entirely. These rules depend on how the money is used, whether it is retained, and how it affects your financial position overall.
Implications for residential care
If you later move into a care home, the local authority will carry out a means test to assess how much you should contribute toward care fees. Any cash released from the home reversion plan may be counted as part of your capital. In addition, the share of the home you still own may also be included in the assessment unless a spouse or dependent is still living there.
For example, if you sold 60 percent and retained 40 percent, that 40 percent share would still form part of your capital and could affect whether you qualify for council-funded care.
Frequently asked questions
Can I buy back the share I sold?
Generally, no. Home reversion plans are intended to be permanent. Once the provider has purchased a share, they are entitled to receive their percentage of the property’s sale proceeds. Some contracts may allow repurchase under exceptional conditions, but this is rare and usually involves paying full market value, not the discounted amount you originally received.
Will my home still pass to my children?
Only the part you have retained will form part of your estate. If you sell 100 percent of the property, your children will not inherit any of it. If you retain 25 percent, they will receive 25 percent of the final sale value when the home is eventually sold. The remaining 75 percent will be paid to the provider.
How much money can I release?
The amount depends on your age, health, and the share of the property you choose to sell. The older you are, and the shorter your life expectancy, the higher the offer is likely to be. However, the value offered is always below market value. As a broad range, you might receive between 30 and 60 percent of the value of the share sold. For example, selling 50 percent of a £400,000 home might provide £90,000 to £120,000.
Can I move home later?
It depends on the provider and the terms of your contract. Some home reversion plans allow you to move, but only if the new property is approved and meets the provider’s criteria. If the new home is worth less, you may be required to repay part of the original payment or adjust the ownership split. Legal and valuation costs may also apply.
Do I need to repay anything?
No. There is no loan and no interest. You do not make monthly payments, and you do not need to repay any of the amount received during your lifetime. The provider recovers their share when the property is sold after you die or move into care.
