Pros and Cons
Home Reversion Plans: advantages and disadvantages
Home reversion plans present a fantastic opportunity for some, yet for others it may not be the best idea. What are the advantages and disadvantages involved? Here is a quick run-down.
A home reversion plan is non-transferable. If you move your home will be sold and the money from the home will be given out as planned. This may be changing, however, so be sure to ask your home reversion plan company about this!
There are no monthly fees and no interest fees for home reversion plans. The income is also tax free and never has to be repaid.
You must be over 65. If you can afford to wait, waiting will help you get a better price as older people tend to get the best rates. For example, a 70 year old will get a better price from their home reversion plan than a 65 year old will.
Those with health problems also get higher rates from a home reversion plan than those who are healthy with confirmed medical conditions getting better prices for your home reversion plan than unconfirmed medical conditions can.
You control how much is sold now and how much goes to your heirs. You also get to control how the money arrives, in a lump sum or in payments. The amount sold can be changed at any point you wish.
With some plans moving into long term care such as a nursing home will result in the same effect as your death; the house will be sold and the money will be distributed as planned. This can be useful, however, for helping pay care costs.
More cash is released than you would have received from a lifetime mortgage or reverse mortgage. The money also never has to be repaid, unlike with a mortgage.
You will become a tenant in your home, but will have a lifetime lease and no fees. You are expected to care for your home yourself, however.
You can gain more money from your payments if the property increases in value. The money coming in is not static and your share will increase in value unless you have sold your entire share.
All home revision plans are regulated and monitored by the Financial Service Authority (FSA).
Once the advantages and disadvantages have been weighed, you can talk with a financial advisor to see what is right for you. In the end, you have the ultimate power over what becomes of your home and more knowledge always creates more power over your life.