A home reversion plan is a less common form of equity release where you sell part or all of your home but carry on living in it. This guide explains home reversion plans: how they work, the value you receive, how the provider is repaid, the age requirement, and how they compare with a lifetime mortgage.
What a home reversion plan is
A home reversion plan involves selling all or part of your home to a reversion provider in exchange for a tax-free lump sum or regular income, while you continue to live there, usually rent-free, for the rest of your life, as our guide to equity release explains. Unlike a lifetime mortgage, it is a sale of a share of your home rather than a loan, which is the defining difference.
You receive less than market value
A crucial point is that you receive less than the full market value for the share you sell, because the provider must wait, potentially many years, before they get their money when the home is eventually sold, and you live there rent-free in the meantime. So the lump sum reflects a discounted value of the share. Understanding that you sell at below market value is essential to weighing a home reversion plan.
How the provider is repaid
The reversion provider is repaid when the home is sold, typically when you die or move into long-term care, receiving their agreed share of the sale proceeds. So if you sold them 40% of your home, they receive 40% of the eventual sale value. Because they receive a share of the future value, the provider benefits from any rise in the home's value on their portion, not you.
You benefit only on the share you keep
If you sell only part of your home, you keep the rest, and you benefit from any rise in value only on the share you have retained, while the provider benefits on their share, as our guide to lifetime mortgages explained explains by contrast. So home reversion changes how you share in future value, which is an important consideration, particularly if you expect your home's value to rise significantly.
The age requirement
Home reversion plans typically have a higher minimum age than lifetime mortgages, often around 65 or older, reflecting that the provider waits for repayment and the calculation depends on life expectancy. So reversion is generally aimed at older homeowners. The older you are, the more you may receive for a given share, since the provider expects to wait less time. The exact age and terms vary by provider.
Home reversion versus a lifetime mortgage
The main difference is that a home reversion plan sells a share of your home (with no interest, but at below market value and giving up future growth on that share), while a lifetime mortgage is a loan you retain ownership against (with compounding interest but keeping the home). Most people choose lifetime mortgages, but reversion can suit those who prefer to sell a share and avoid interest, as our guide to the pros and cons explains.
A less common choice
Home reversion plans now make up a very small part of the equity release market, with lifetime mortgages overwhelmingly preferred, partly because reversion means giving up ownership of a share at below market value. Still, reversion suits some circumstances, and it remains a regulated option. Because it is a significant and less common choice, specialist advice is especially important to understand whether a home reversion plan is right for you.
An example of home reversion
Suppose your home is worth £300,000 and you sell a 50% share to a reversion provider. Because they wait for repayment and you live there rent-free, they might pay you well below £150,000 for that share, the discounted value. When the home is later sold, they receive 50% of the sale price. This example shows both the lump sum you get and the share of future value you give up under reversion.
Selling part or all
You can sell all of your home or just a portion through a reversion plan. Selling only part lets you keep a share, and so some of the future value and inheritance, while selling all gives a larger lump sum but leaves you with no stake. Choosing how much to sell balances the cash you need now against what you keep, which is an important decision when considering a home reversion plan.
What if you want to move?
Moving home after taking a reversion plan can be more complicated than with a lifetime mortgage, since you have sold a share of your specific property to the provider. The plan's terms govern what happens if you wish to move. So if there is a chance you will want to move, it is important to understand how the reversion plan handles this before committing, as our guide to the pros and cons relates.
The pros and cons
The advantages of reversion are no interest or debt and certainty about the share you have given up, while the drawbacks are receiving below market value, giving up future growth on the sold share, and giving up ownership of part of your home. Weighing these against a lifetime mortgage, where you keep ownership but face compounding interest, helps you decide. For most, lifetime mortgages are preferred, but reversion suits some.
Taking advice on reversion
Because a home reversion plan involves selling part or all of your home at below market value and giving up future growth on the sold share, it is a significant decision that, like all equity release, must be arranged through a qualified adviser, as our guide to getting later life advice explains. An adviser will weigh it against lifetime mortgages and other options. Given its irreversible nature, careful advice is especially important with reversion.
Is home reversion right for you?
Home reversion can suit those who prefer to sell a share of their home and avoid any interest or debt, accepting below market value and giving up future growth on the sold portion, and who are comfortable giving up part-ownership. For most, a lifetime mortgage is preferred, as our guide to lifetime mortgages explains, but reversion remains an option for particular circumstances, which advice can help you assess against the alternatives.
Now a small and specialised corner of the equity release market, home reversion remains worth understanding as one of the routes available, so that any later life decision is made in full knowledge of the alternatives rather than by default.
In short
A home reversion plan involves selling all or part of your home to a provider for a tax-free lump sum or income, while living there rent-free for life. You receive less than market value for the share sold, and the provider takes their share of the proceeds when the home is sold on death or moving into care. It usually requires you to be older, often 65 plus, and is now a rare choice compared with lifetime mortgages.
Where to get help and next steps
Read our guides to equity release explained, how lifetime mortgages work, and downsizing in retirement. This is general information, not financial advice; rates and rules change, so seek qualified advice.