Home Reversion Plans Explored
Home reversion is when you sell a part or all of your home to an investment company. The company will then give you a cash sum of money or income for life depending on how you structure the sale. The idea is that you actually transfer legal ownership in part or all to the investment company so that you can have some income for the rest of your life. The remaining portion you did not sell is held in a trust. The greatest thing about home reversion plans is the rent free option. It is usually called peppercorn rent. The idea is that the investment company owns part or all of the home, but you get to live in the home without paying a mortgage or any rent. If you die the entire property is then sold to the investment company. The investment company will then sell the home and all proceeds from the sale will go to the company. If you have only sold a portion of the home the portion you did not sell will go to your estate and therefore you heirs.
There are a few advantages to the home reversion plans. It is important to know all aspects of the home reversion plans before you follow through with any part of the sale. The first advantage is knowing a portion of the home is going to be used at the beginning. You will state how much you sell. You can also leave a fixed proportion in your home. In other words you can leave equity in the home by not selling the entire home and therefore have a little extra for the estate. There are also flexible plans that allow you to get only the amount of money you need for the now rather than having more than you need. You will also be guaranteed to have further income released if needed later on.
The disadvantages include being a tenant in your own home as you no longer hold the ownership, you may not benefit completely from housing prices on the rise, there are payment penalties, and your tax position may be affected. Most loans that you pay off early tend to have a payment penalty that will cost you a little more than you bargained for. You need to way these concerns with the advantages and your current financial position before signing on for the home reversion plans.