You're retired - working on, benefits, equity release
By Paul Davies
Article 3 of 4
One type of equity release is a home reversion loan. In this expert guide, we explain how it works and the risks to watch out for.
Home reversion: how it works
By selling a share of your property, you become a co-owner but continue to enjoy the right to live in it for the rest of your life.
The way home reversion works makes the cost harder to estimate than with a lifetime mortgage. You surrender a percentage of your property in exchange for a sum based on its current value, but the ultimate cost is based on its price at the end of the deal.
The main providers of home reversion schemes are currently Bridgewater and Newlife.
Home reversion deals
In the same way that lifetime mortgage lenders vary the amount they are prepared to advance according to age, home reversion providers demand a bigger share of equity from younger borrowers and less from those that are older.
You can usually sell between 25% and 100% of your property to the provider, but the amount you get in return will be significantly less than that share you surrender. The older you are, the more you'll get but, at age 65, for example, a 20% advance can mean surrendering 70% of your property's value.
The Which? Money Helpline has a team of qualified experts that can help answer your questions on equity release. Sign up to a £1 trial with Which? and speak to one of our experts.
- Last updated: June 2016
- Updated by: Ian Robinson