Home reversion plans versus lifetime mortgages

Those who are over the age of 55 and looking to release equity from their property usually have a choice of downsizing or taking a form of equity release. Equity release could be an option if you would prefer to stay in your own home and not downsize. Read our guide to find more about how equity release works or look at our equity release FAQs.

Home reversion plans and lifetime mortgages both allow you to release the equity or cash tied up in your home. They both allow you to stay in your own home and use the cash to fund your retirement and they also allow you to receive cash without having to make regular repayments or risk losing your home. Any money borrowed will need to be repaid when you enter long-term care or when you pass away. However, a lifetime mortgage and a home reversion plan are very different types of products; a lifetime mortgage is a loan secured against your property, while a home reversion plan sells a share of your property at less than its market value. We’ve set out the main differences between lifetime mortgages and home reversion plans below.

Those organisations that advise on or sell equity release products must be authorised by the Financial Conduct Authority (FCA). Firms that are regulated by the FCA must adhere to specific standards, in areas such as product design, advertising, sales and complaints processes.

The amount of money you can expect to receive from a lifetime mortgage and home reversion plan will depend on your property, health and age. Some home reversion plans will buy 100% of your home but for between 20% and 60% of the price. A lifetime mortgage may give you up to 60% of the property’s value, but this will accrue interest if not paid back and could eat into your remaining equity.

Both types of equity release are regulated by the FCA and require you to receive advice before you take out a product. Both products come with risks, such as the potential for negative equity (unless your lifetime mortgage is from a provider that is a member of the Equity Release Council in which case it will have a no negative equity guarantee) with a lifetime mortgage and not being able to benefit from future house price increases to the share you have sold under a home reversion plan. Both products will impact the value of the estate you leave behind and any decision to take equity release should be made alongside your family and/or estate’s beneficiaries.

• Aviva
• Canada Life
• Just
• Legal & General
• LV=
• More 2 Life Ltd
• OneFamily
• Pure Retirement

Moneyfacts assesses the best equity release products available each year as part of its Star Ratings programme. This gives consumers an indication of which equity release products have the best range of features and their flexibility for borrowers. Find out which equity release products got a top rating.