Home Reversion is where you let a financial institution take over ownership of your house. They will give you a lump sum of money in return and agree to let you live their until you no longer need the house. It is something which many people use to get cash back that is tied up in their property.
There are different ways to release equity in your home and this is actually one of the least popular. The reason for this is probably because you get a sum which is lower than the value of your house, but you will still gain form any increase in value of the property.
However, it is probably the way that you can release the biggest sum of money from your property. This could be attractive for people who need a big chunk of money for some reason.
Reasons for needing this could be to do house renovations or to go on a holiday. Some people like to give their children their inheritance early, perhaps because they need it right away or because they enjoy watching them spend it.
People do not like the idea of home reversion as it has got a bad press. However, the schemes have been overseen by the Financial Services Authority since 2007 and so it is now a much more reliable service.
Some of the advantages are that you can guarantee that a certain percentage of the property will still be left untouched and will be able to form part of the estate once the home owner(s) die. There is no interest accruing which means there is no debt. It can raise more money than a lifetime mortgage will.
There are also some disadvantages in that you will not own all of your home any longer and some people like the security of knowing that they own all of their property. If the property is sold completely then there will be nothing left for beneficiaries. The increase in value of the property will only be gained on the bit that you still own, if any. Reversion companies can be fussy about houses they accept for this scheme and so you may not get much. If the home owner(s) die just after signing up, they will not have very much money in their estate compared to the value of the house. There are good and bad things about the scheme, like with most financial decisions.
