They are the two main forms of equity release, and they work in opposite ways. With a lifetime mortgage you borrow against your home and keep owning all of it. With a home reversion plan you sell part or all of your home to a reversion company, and carry on living there rent free. We advise on lifetime mortgages. We do not advise on home reversion; we refer those cases to sector specialists.
Lifetime mortgage: borrowing against your home
A lifetime mortgage is a loan secured against your home. You stay the owner, and on a standard roll-up lifetime mortgage, no regular repayments are required while you live there and keep to the plan's terms.
- Who it is for: homeowners aged 55 or over, on their main residence. There is no upper age limit.
- How much: based on your age and your property's value, not your income. Joint applications are assessed on the younger applicant. The minimum release is £10,000.
- Interest: interest is charged; you can pay it or let it roll up. You can pay some or all of it. If it rolls up, interest is charged on the interest as well, so the amount owed can grow significantly over time.
- How it is repaid: usually from the sale of your home when the last borrower dies or moves into long term care. It can be repaid earlier, though early repayment charges may apply.
Home reversion: selling part of your home
A home reversion plan is not borrowing. You sell part or all of your home to a reversion company in exchange for a lump sum or regular payments.
- Living there: you continue to live in the property rent free until you die or move into long term care.
- When it ends: the property is sold and the reversion company takes its share.
- How much you sell: you can sell up to 100% of your home's value. The company pays a discounted rate for the share it buys, rather than its full market value.
- Minimum: the minimum is £25,000.
- What you keep: any share you do not sell stays yours, and that share of the sale proceeds comes back to you, or to your estate.
The main differences side by side
| Lifetime mortgage | Home reversion | |
|---|---|---|
| What happens | You borrow against your home | You sell part or all of your home |
| Who owns the home | You do | The reversion company owns the share it bought |
| Interest | Interest is charged; you can pay it or let it roll up | None, because nothing is borrowed |
| What you receive | A lump sum, or drawdown over time | A lump sum or regular payments |
| Minimum | £10,000 release | £25,000 |
| When it ends | Usually repaid from the sale of your home | The company takes its share of the sale |
| Who advises here | Craig, whole of market | Referred to sector specialists |
Why we refer home reversion out
We are whole of market for lifetime mortgages, and we also give independent whole of market advice on retirement interest only, term interest only and interest only mortgages for ages 50 and over. Home reversion is a different product, and if home reversion is something you want to look at, we refer you to sector specialists who work with it.
That is not a judgement on home reversion. For some people it may be worth exploring, and a specialist can explain how it would apply to your home.
What applies to both
Whichever route you look at, some things are the same.
It reduces what you leave. Equity release will reduce the value of your estate, so there will be less to pass on. It is worth talking through with your family.
It can affect benefits. The money released could affect your entitlement to means-tested benefits.
You need advice and a solicitor. The FCA requires that you receive specialist advice from a financial adviser and a legal representative, and you must have independent legal advice before going ahead.
There may be a better answer. Sometimes downsizing, a retirement interest only mortgage, a benefit going unclaimed, or doing nothing at all would suit you better. See alternatives to equity release.
For how much a lifetime mortgage could release at your age, see how much equity can I release. For the protections that come with a lifetime mortgage, see is equity release safe?
Lifetime mortgage or home reversion: common questions
What is a home reversion plan?
You sell part or all of your home to a reversion company for a lump sum or regular payments, and keep living there rent free until you die or move into long term care. The home is then sold and the company takes its share.
What is the main difference between a lifetime mortgage and home reversion?
With a lifetime mortgage you borrow and keep owning your home, and interest is charged on the loan. With home reversion you sell a share of your home and no interest is charged, but that share is no longer yours.
Do you arrange home reversion plans?
No. We advise on lifetime mortgages. If home reversion is something you want to look at, we refer you to sector specialists.
Is there a minimum amount?
Yes. The minimum for a lifetime mortgage is £10,000. The minimum for home reversion is £25,000.
Can I still live in my home?
Yes, with either. A lifetime mortgage leaves you as the owner. With home reversion you carry on living there rent free until you die or move into long term care.
Not sure how any of this applies to your own circumstances? Craig is happy to talk it through, free and with no obligation.
Talk it through with Craig
If you are weighing up a lifetime mortgage, or are not sure which route fits, that is a conversation. The first one is free, and our advice fee is a maximum of £1,495, payable only if your case completes.
Book a call with Craig or call 0113 403 5584.
