Equity Release Schemes Jonathan Gerber Equity release allows homeowners to unlock the equity within their property without having to sell their property and move out. Equity release schemes are available for homeowners aged 55 or older and there are two ways equity can be released. • Home reversion plans Also known as a home income plans, where you sell some or all of your property to a plan provider in exchange for a one off lump sum or regular monthly income. • Equity release mortgages Using a mortgage related equity release scheme you raise a mortgage against your property, but do not make any interest or capital repayments. You can receive a one off lump sum, regular monthly income, or a mixture of both. Home Reversion Plans Home reversion plans are designed for home owners who wish to release the maximum amount of equity within their property. Unlike equity release mortgage schemes where you retain full ownership of your property using a home reversion plan you sell some or all of your property to the plan provider. The advantage of home reversion plans is they normally allow homeowners to release the maximum lump sum from their property, without concerns over future house prices. The disadvantage of home reversion plans is that you will forego some or all of the potential future growth in the value of your home. Key Features of home reversion plans • Maximum tax free lump sum • Can sell property in part or in whole • Guaranteed tenure (from SHIP member provider) • Excellent debt consolidation tool The amount of equity you can release under a home reversion plan will depend upon your age, and the value of your property. With home reversion plans, also known as home income plans, you sell all or part of your property to the plan provider. As you sell your property in exchange for the equity released the plan provider takes the risk on future house prices. If you sell 30% of your property to the plan provider, known as a partial reversion, the plan provider will be entitled to 30% of the sale price when your property is eventually sold. If you sell 100% of your property to the plan provider, known as a full reversion, the plan provider will be entitled to 100% of the sale price when your property is eventually sold. Note you will not receive the actual cash equivalent lump sum as the percentage of the property sold to the home reversion plan provider. The actual cash value offered will be subject to the discount factors applied by each individual home reversion plan provider. If you sell all of your property to a plan provider under a full reversion plan you will become a lifetime tenant in your home. You will not be charged any rent but you will be responsible for maintaining the property and any repairs. Home reversion plans normally offer a choice of a tax free lump sum or a guaranteed regular monthly income. Home reversion plans are available from age 65 and normally require a minimum property value of £40,000. Most plan providers do not impose an upper age limit, and will release a greater percentage of the value of the house for older applicants. Subject to the individual terms of the home reversion plan providers you may be able to move properties in the future. There are different terms applied to partial reversions and full reversions. All providers who offer home reversion plans and are members of the safe home income plan scheme (SHIP) provide guaranteed tenure and a no negative equity guarantee. This guarantees that you will always have rent free tenure of your home until you die regardless of the future value of your house. Using a home reversion plan means you will only be responsible for your home contents insurance as the plan provider will be responsible for the buildings insurance.