Newspaper article The Journal (Newcastle, England)

The Options

Newspaper article The Journal (Newcastle, England)

The Options

Article excerpt

You should check carefully whether any scheme you are considering allows you to move in the future and meets your requirements.

Home reversion schemes: This involves selling your home or a part of it to a private company called a reversion company.

In return you receive a cash lump sum or monthly income. You can remain in the house rent-free or for a nominal monthly rent, for the rest of your life.

When the property is sold, usually after your death, the reversion company receives the proceeds from the sale, depending on what share of your home you sold.

For example, if you sold a 50pc share of your home, the reversion company will receive 50pc of the proceeds when it is sold. If you sell only part of your home this obviously means you receive a smaller cash lump sum or lower monthly income. But when the home is sold you or your heirs will benefit from any increase in the value of the part of your home which you keep.

When you sell your home, or part of it, to a reversion company you will not receive the full value that you would get if you sold on the open market. This is because the reversion company gives you the right to live in your home for the rest of your life.

So you will receive only a percentage of the market value, calculated on age and sex. Older people will get more than younger people and men will get more than women of the same age. This is because they have a lower life expectancy. Certain schemes may buy your home at a higher price and in return you would pay an ongoing rent while you live in your home.

Home income plans: Another form of scheme, but one which has become less attractive following changes made in the March 1999 Budget.

With a HIP you receive a monthly income for life while still owning and living in your home. You do not have to make payments to repay the capital of the loan during your lifetime. …

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