Please note: this article was not written by a financial or legal specialist, and does not cover every circumstance. Please consult a specialist before making any financial or legal decisions.
There are two kinds of equity release in the UK: lifetime mortgage and home reversion.
Home reversion is when some or all of your property is sold to a home reversion provider, and you receive a lump sum of money, or a rent-free lifetime lease. These are far less common than lifetime mortgages and are most commonly used towards care given within your own home.
Who can release equity from a property using a home reversion plan?
Equity release is releasing money from the value of your property, which you can take a lump sum or as a set of smaller amounts.
Releasing equity from your home means you can access the money tied up in your property. This money can then be put towards the cost of care.
To release equity from a property you own, you need to be over 55 and your property has to be worth over £70,000.
Questions about funding care?
Call us for your free consultation with one of our friendly UK care experts. If you need further support, our Care Concierge service is on hand to provide guidance on typical care costs, help you explore your funding and benefit options, or even negotiate care fees on your behalf.
Find out how Care Concierge can help you, or call now on freephone:
(Mon-Fri, 9am-5pm)
Releasing equity to pay for care with home reversion
Like a lifetime mortgage, home reversion allows you to stay in your home and release money from your property which you can put towards the cost of your care. You can stay in your home rent-free until you die or decide to move out.
Unlike a lifetime mortgage, this is not a loan and there is no repayment needed. Please note that in order to release equity using home reversion, you first have to pay off any debts secured against your property, such as an existing mortgage.
Protecting against negative equity with home reversion
With home reversion you don’t need to worry about your property going into negative equity. This is because you sell all or part of your home to the home reversion provider at the time of arranging the home reversion.
However, it’s important to know that you will be paid less than the market value (usually 30%-60% of market value) of the property by the home reversion provider. The older you are when you arrange the home reversion, the higher the percentage you’ll get of the property’s market value.
The cost of arranging home reversion to pay for care
There can be costs associated with arranging the home reversion scheme.
These may include:
- An arrangement fee to the home reversion provider
- Legal fees
- Adviser fees
- A valuation fee on your property
Summary
From what age can you arrange a home reversion plan?
You can arrange a home reversion plan from the age of 65.
Can I go into negative equity with a home reversion plan?
With home reversion you don’t need to worry about your property going into negative equity. This is because you sell all or part of your home to the home reversion provider at the time of arranging the home reversion.
What if I want to move when I have a home reversion plan?
You may be able to transfer the home reversion scheme if you want to move into another property. However, it’s important to discuss this in advance with your home reversion provider when arranging the scheme.
Can I release the full value of my property with a home reversion scheme?
No, you will be paid less than the market value of the property by the home reversion provider. This means that you won’t be able to release the full value of your property.
Are there risks associated with home reversion schemes?
There are risks associated with home reversion schemes. You will no longer be the sole owner of your home, and it can be expensive to cancel the plan. They can also have major implications for benefits, tax, and inheritance.
Do I need to get financial advice before deciding on an equity release scheme?
Yes, you should always seek professional financial advice before taking out any kind of equity release scheme.
Questions about funding care?
Call us for your free consultation with one of our friendly UK care experts. If you need further support, our Care Concierge service is on hand to provide guidance on typical care costs, help you explore your funding and benefit options, or even negotiate care fees on your behalf. Find out how Care Concierge can help you, or call us now on freephone:
0800 098 8299 (Mon-Fri, 9am-5pm)
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