Home Reversion Plans
A home reversion plan is a type of equity release. It allows you to sell part or all of your home to a provider in exchange for a lump-sum cash payment, regular payments, or both. You can usually continue living in the property for life, or until you move permanently into long-term care.
This is not the same as a lifetime mortgage. With a lifetime mortgage, you borrow against your home. With a home reversion plan, you sell a share of your home.
That difference matters.
A home is not only an asset. It is often a place of memory, stability and family meaning. Releasing value from it can support later-life plans, but it can also change what you own, what you leave behind, and how future decisions are made.
At Connect Lifetime, we believe home reversion should be understood slowly, clearly and with advice before any decision is made.
What Is a Home Reversion Plan?
A home reversion plan is an equity release arrangement where a provider buys a share of your home.
You may sell a percentage of the property or, in some cases, the full property. In return, you receive money. This may be paid as:
- A single lump sum
- Regular payments
- A mixture of both
You then continue to live in the property under a lease or occupancy agreement. This usually gives you the right to remain in the home for life, provided you follow the terms of the plan.
When the property is eventually sold, normally after death or a permanent move into long-term care, the provider receives its agreed share of the sale proceeds.
The part you have kept may pass to your estate.
How Does a Home Reversion Plan Work?
A home reversion plan normally follows a structured process.
First, your property is valued. The provider then offers an amount based on the share it is willing to buy.
The amount offered is usually less than the open market value of that share. This is because the provider may have to wait many years before it can sell the property and recover its money.
For example, you may sell 40% of your home. You continue living there. When the property is sold in the future, the provider receives 40% of the sale price, and your estate receives the remaining 60%, after relevant costs.
The percentage sold usually stays fixed. If house prices rise, the provider benefits from the rise on the share it owns. If values fall, the provider’s share is still based on the sale proceeds.
This gives clarity, but it also means giving up part of future property growth.
Is a Home Reversion Plan a Loan?
No. A home reversion plan is not a loan.
This is one of the main differences between a home reversion plan and a lifetime mortgage.
With a lifetime mortgage, interest is charged on the amount borrowed. The loan and interest are usually repaid when the home is sold.
With a home reversion plan, there is usually no interest because you are not borrowing. You are selling part or all of the property.
That may sound simpler, but it does not mean it is cheaper. The cost is often built into the discounted price you receive for the share you sell.
Who May Be Eligible?
Eligibility varies between providers, but home reversion plans are usually aimed at older homeowners.
You may need to meet criteria based on:
- Age
- Property value
- Property type
- Property condition
- Whether the property is your main home
- Whether there is an existing mortgage
- The amount of equity available
Some providers may require the youngest homeowner to be at least 60 or 65. If there is an existing mortgage, it may need to be repaid as part of the arrangement.
A qualified adviser can check whether a home reversion plan is available and whether other options should be considered first.
Home Reversion Plan vs Lifetime Mortgage
A home reversion plan and a lifetime mortgage are both types of equity release, but they work in different ways.
| Area | Home Reversion Plan | Lifetime Mortgage |
|---|---|---|
| Structure | You sell part or all of your home | You borrow against your home |
| Ownership | You no longer own the share sold | You usually keep ownership |
| Interest | Usually no interest | Interest usually applies |
| Repayment | Provider receives share when home is sold | Loan repaid when home is sold |
| Inheritance | Reduced by the share sold | Reduced by loan and interest |
| Future house price growth | Provider benefits on its share | You may benefit after loan repayment |
| Suitability | May suit those wanting certainty | May suit those wanting to keep ownership |
A lifetime mortgage is more common in today’s equity release market. However, a home reversion plan may still be considered where certainty over ownership shares is important. To understand the wider equity release market, you can read Connect Mortgages’ guide to equity release mortgages.
Advantages of a Home Reversion Plan
A home reversion plan may offer:
- Access to money tied up in your home
- No monthly interest payments
- The right to remain in your home, subject to plan terms
- A clear split of future sale proceeds
- The option to retain part of the property for inheritance
- Possible lump sum or income-style payments
For some people, the appeal is certainty. They know the percentage sold and the percentage retained.
Certainty has value, but it must be weighed against what is being given up.
Risks and Disadvantages
Home reversion plans involve serious trade-offs.
You may receive less than the market value of the share you sell. You may also lose the benefit of future house price growth on that share.
Other points to consider include:
- Your estate may receive less when the property is sold
- Means-tested benefits may be affected
- Local authority care support may be affected
- Moving home may depend on provider rules
- You may need to maintain and insure the property
- Buying back the share may be difficult or costly
- Family members may be affected by the decision
This is why advice should look beyond the amount released. It should also consider estate planning, benefits, future care, property condition and family circumstances.
Alternatives To Consider
A home reversion plan should not be reviewed in isolation.
Depending on your circumstances, alternatives may include:
- Downsizing
- A lifetime mortgage
- A retirement interest-only mortgage
- Remortgaging
- Using savings or investments
- Family support
- Budget changes
- Delaying the decision
You can also compare whether moving or releasing equity is more suitable in our guide to downsizing or equity release.
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FAQs: Home Reversion Plans
Most frequent questions and answers about residential mortgage
Yes. Money released from a home reversion plan may affect means-tested benefits or future care funding assessments.
Usually no. There is normally no interest because you are selling part of the property rather than borrowing money.
Yes, most plans are designed to let you stay in the property for life or until permanent long-term care, provided you meet the plan terms.
Yes. Home reversion plans are major later-life financial decisions. You should seek qualified equity release advice and legal advice before proceeding.