How good would it be if you could sell only a part of your home and still live there for the rest of your life? You probably feel this would be pretty great, and the great news is yes, you could do so by choosing a form of equity release called a Home Reversion Scheme. It offers the occupant a lifetime tenancy agreement whereby you can remain living in your home for the rest of your life, rent free. Once you have decided to sell your home, the home reversion company pays you the market value of the sold property as a lump sum in cash or as a monthly income. You can choose to get a combination of the two as well.
With a home reversion plan, you will have to sign a legal document called the Lifetime Lease agreement. Under this agreement, you are no longer the sole property owner. The ownership of the home becomes the home reversion company's and the maintenance of the property and the payment of the utility bills remains that of the tenant's. You can sell either 100% of the property or a minimum of 25%. Based on the percentage of the property sold and the age of the property owner, you can expect to receive 20% to 60% of the property value.
Selling the entire home brings a greater amount of tax free cash; however, it is sensible to sell only a part so that after your death, there will be some share of the property left in your name to be inherited by your beneficiaries. In many cases, the old and chronically sick people sell the entire home as it is easier to raise money under the home reversion plan, without the implications of rolled-up interest that a lifetime mortgage has.
There are many reasons why a home reversion plan is still a better proposition than other loans and mortgages in retirement:
Once you have sold a part of the home, you can still opt to sell a remaining percentage of the property for the current market value
Age is a very predominant factor when you plan to sell your home under the home reversion plan. The minimum age for any home reversion plan is 65. The older one is at application, the greater the amount of cash they will receive for the percentage of the property forfeited. Home reversion plans are based on life expectancy.
Always get expert & impartial equity release advice before taking any form of lifetime mortgage or home reversion scheme. Also, ensure any scheme taken out has been recognised by the Equity Release Council (formerly SHIP). An expert in home reversion will help you with the lifetime tenancy agreement.
Like any tenancy agreement, what is written in the contract determines how you can use the property and what remains under your control. If you are a married couple in which one person is ill and the other is not, you want to make certain both names are on the lifetime tenancy agreement. The last surviving person in the house can remain even if the other part of the couple has moved out to long term or passed on.
A few companies will allow younger individuals to remain in the house. They must be included in the home reversion plan or the additional person will be asked to sign a waiver regarding their rights to occupancy. There can be additional fees for this part of the plan.
Some worries might crop up as you examine home reversion and lifetime mortgages such as property maintenance. While you do need to keep the house up, you are not expected to exceed the current standard your home is in. You are just required to maintain it as it currently stands. Remember to examine the entire lifetime tenancy document and ask questions to avoid any later issues.
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