In Part 2, we looked at lifetime mortgages. We'll now take a look at another type of equity release scheme - home reversion plans.
Home reversion plans
With a home reversion plan, a property owner agrees to sell all or part of their property for an agreed amount; they then receive the money as a lump sum, as income, or both.
The money paid under a home reversion plan, however, never reflects the full market value of the property. This is because whoever buys it will not get their money back until the vendor dies or moves out.
On average, vendors receive 20% to 50% of a property's current market value, depending on their age (and their partner's, if applicable).
If the vendor sells their entire interest in a property, after they die their estate will have no right to any of the sale proceeds.
But if the vendor sells only a percentage of their property, after they die their estate will have a right to a share of the sale proceeds commensurate to the interest retained.
Some plans offer rebates for a vendor's family if they die within the first few years of signing up to a home reversion plan.
Always seek advice from a solicitor &/or independent financial planner before investing in an equity release scheme.