What Is a Home Reversion Plan?

A home reversion plan is the less common of the two main types of equity release, but for some people it has real appeal. Instead of borrowing against your home, you sell all or part of it to a reversion provider in return for a tax-free lump sum, a regular income, or both. You then continue to live in the property rent-free under a lifetime lease, for as long as you wish. When the home is finally sold, usually after you die or move into long-term care, the provider takes its agreed share of the proceeds. Our guide comparing lifetime mortgages and home reversion sets the two side by side.

How home reversion differs from a lifetime mortgage

The fundamental distinction is that a home reversion plan is a sale, not a loan. With a lifetime mortgage you borrow money and interest rolls up on the debt; with home reversion there is no interest at all, because you have simply sold a slice of your property. That changes the arithmetic of what your family eventually receives.

That fixed-percentage certainty is the main attraction. Because you know precisely what share you have sold, you also know precisely what share of the eventual sale proceeds is protected for your heirs, regardless of how long you live or what interest rates do. For someone who wants a guaranteed inheritance for their family, that predictability can be worth more than the flexibility of a lifetime mortgage.

The trade-offs to weigh

The obvious drawback is value. Because the provider waits years or decades to be repaid, and you live there rent-free throughout, it pays far less than the open-market price for the share it buys. If you were to die shortly after taking the plan, the provider would receive its full share for a fraction of the cost, which makes home reversion generally more suitable for older applicants: the minimum age is typically 60 or 65, higher than for a lifetime mortgage.

You also give up part of the ownership of your home permanently, which some people find harder to accept than taking on a debt. And because far fewer providers offer reversion plans than offer lifetime mortgages, there is less competition and less choice. For all these reasons, home reversion now accounts for only a small slice of the equity release market.

It is worth being clear about what happens to house-price growth, because this is where reversion cuts both ways. On the share you have sold, all future growth belongs to the provider, so if your home rises sharply in value, the provider profits, not your estate. On the share you have kept, the growth is yours. Selling only a portion therefore lets you keep a stake in any rise, which is a large part of why partial reversion is usually preferred to selling the whole property outright.

Like a lifetime mortgage, a reputable home reversion plan carries important safeguards. Providers that follow Equity Release Council standards guarantee your lifetime right to remain in the property, set out your obligations to keep it in good repair, and give you security of tenure that cannot be revoked while you live there. A solicitor must confirm you understand the arrangement before it completes, exactly as with any equity release product.

Who home reversion can suit

Despite its smaller role, home reversion can be the right answer for a specific type of person: an older homeowner who wants to guarantee a fixed share of their property for their family, is comfortable selling part of it, and is less concerned about receiving full market value. For most others, a lifetime mortgage, particularly a drawdown version, offers more flexibility. If you are still weighing up the whole idea, our is equity release a good idea? guide is a useful next step.

As with every form of equity release, regulated advice is a legal requirement, and it should include a hard look at the alternatives. Vetted Wealth can connect you, free of charge, with an independently vetted, FCA-regulated equity release adviser who can compare reversion plans against lifetime mortgages for your circumstances. This is information, not personal advice.

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