In this blog post, I want to highlight the lesser-known home reversion type of equity release.
Home reversion plans are not a new concept – they have been around for many years now, and people have been taking advantage of them for just as long.
The idea is that you can take some of your hard-earned money from your property and convert it into cash,
So you don’t need to worry about retiring with anything but the house keys in your pocket!
The Benefits of Home Reversion Schemes
You can get a lump sum1 of money upfront or opt for regular payments.
And the best thing is they’re designed to help as many people as possible by offering affordable rates and flexible repayments.
The other great thing about home reversion plans is that they provide peace of mind in retirement because you will repay your debts on your property via these schemes if you decide not to live there anymore.
So even if it’s challenging to afford to live at home all the time when you retire, this could give some extra security – knowledge that everything will be taken care of just like before!
No Monthly Payments
You won’t be required to make any monthly repayments on your home reversion.
This means you can use the money however you want, and it’s not tied up in repayments like other types of equity release maybe.
If you’re looking for a home reversion company, we believe that the best ones will offer:
- affordable rates and flexible repayments.
- peace of mind in retirement because your debts on your property will be repaid when you decide not to live there anymore.
So if you decide that now is a good time for an overseas trip, or maybe investing in property abroad as well as at home,
Then this could give you more flexibility than traditional methods with smaller lump sums upfront.
With no ongoing costs, there are even more significant benefits!
A Rise in Property Values
You’re also likely to see a rise in property values with a home reversion.
That’s because your equity release size stays fixed and you can’t sell it for more than that, so when house prices go up, you get the benefits!
No matter what happens – whether there is an emergency or not – as long as your repayments are being met, this will ensure all debts on your home continue to be serviced.
So if something terrible were to happen, like illness or injury, you’ll still have peace of mind knowing everything will carry on without interruption.
And any remaining funds would stay invested within the policy until death.
The benefits of equity release home reversion plans include a guaranteed income, safety, and peace of mind in retirement.
We all know about the importance of investing in what is needed for our future, but sometimes we don’t have enough savings to provide that security.
Even though most people are now aware of how important it is to save money when they can, not everyone has done so or had the opportunity to do so as much as others.
There could be many reasons for this – more than one job working at once might mean less free time;
Divorce means there’s only half the amount; illness or injury stops someone from being able to work.
Our research shows that over 75% (or three out four) of adults aged 18-34 have never saved a penny for their retirement.
Release More Equity Compared to Lifetime Mortgages
If you’re considering the release of equity in your property, a home reversion is likely to be more beneficial than what’s available with lifetime mortgages.
This type of plan typically offers better rates, too, since an investor takes less risk with a home reversion.
The investment is usually more secure, as the policyholder can repay any loans at any time and would typically only need to meet some minimum monthly payments –
Which are often lower than what’s required for lifetime mortgages.
This type of equity release also provides flexibility in that it allows you to make additional withdrawals.
Home reversion plans also offer tax-free lump sums.
This applies to any up-front payments that the client may make and interest earnings on funds withdrawn by the policyholder, and any capital growth2.
The only time when this is not true is if an individual decides to take out a lifetime mortgage instead of using a home reversion plan.
The benefits of equity release home reversion plans are that you get to access your money tax-free.
It is flexible in how much can be withdrawn from the policy at any time, giving people more control over their finances.
This type of equity release also offers peace of mind as the investment is protected by the Government’s Financial Services Compensation Scheme3.
Investing in a home reversion plan could be the best decision you ever make.
Another great benefit of equity release plans for you and your family is that they may offer relief from inheritance tax, which can take up to 40% or more off what’s left after death.
This means your family will have more money to enjoy as well!
Uses for home reversion schemes can include:
- Wishing to fund a care home stay.
- Wanting to provide an inheritance for your family.
- Clearing debt.
- Health long-term care costs.
- Making a large purchase.
You might want to consider seeking advice from a financial adviser about which equity release option is best for you.
They can help with the decision-making process and recommend one type of home reversion plan over another.
A qualified professional will be able to advise on the suitability of different products, too –
This could include whether or not your equity release plan will be enough to fund the care you want.
You can’t underestimate the importance of financial advice.
Financial advisors can also offer guidance on inheritance tax planning, debt management4,
And future financial goals such as buying a property of your own or paying for a child’s education.
Got Questions? Check These First
What Are the Benefits of a Home Reversion Plan?
This investment is usually more secure because it can be repaid anytime, and you only need to meet some minimal monthly payments.
Home reversions also offer flexibility as they allow for additional withdrawals, which is a good thing if you wish to have liquidity later in life or require a more significant sum of money earlier on.
Is a Home Reversion Plan Better Than a Lifetime Mortgage?
The most significant benefit to a home reversion plan over a lifetime mortgage is flexibility. This type of investment allows for additional withdrawals, which are better if you want liquidity later on in life or need more money earlier on.
Do Home Reversion Plans Have Monthly Payments?
Home reversion plans have monthly payments, and they are usually higher than those of a lifetime mortgage. However, this type of investment is more flexible because it can be repaid at any time with only minimal or no penalties.
Are Home Reversion Plans Tax-Free?
Home reversion plans are not tax-free. However, the income earned from this type of investment is taxed at a lower rate than other investments like stocks and bonds that are taxable as capital gains or dividends.
Home reversions are typically the better option for equity release.
This is because they offer more flexibility and higher rates than a lifetime mortgage –
Which can be good if you need to maximise your liquidity at some point in your life or require a more considerable sum of money earlier on.