Home Reversion Plan Calculator – How It Can Help You

Understanding how to unlock money from your home can be tricky. That’s where a home reversion plan calculator comes in handy. This tool helps to show how much money you could release from your home.

We know that the topic of equity release can be a bit scary – you might worry about debts and how it all works. But you're not alone.

In this guide, we’ll explain:

•  How a home reversion plan calculator can assist you
•  The importance of getting a realistic quote for your home
•  The ins and outs of equity release and home reversion schemes
•  The differences between a drawdown and lump sum home reversion plan
•  How these plans are regulated and what the Equity Release Council is

Home improvements are one possible use of equity-release funds.¹ This guide provides general information; a specialist adviser should assess whether equity release is suitable for you.

Let’s start finding out more about home reversion plans and how they might work for you.

What is equity release and who can use it?

A lifetime mortgage is a loan secured on your home; you retain ownership. Interest that is not paid is added to the balance. The loan is usually settled when the last borrower dies or moves permanently into care, subject to the contract. Required or optional repayments vary by product. A home reversion plan is a sale of part or all of your home, usually below open-market value, in return for money and the right to remain under the plan’s occupancy terms. It is not a loan. The provider receives its agreed share when the home is sold.

Most standard lifetime mortgages start at age 55, but some payment-term lifetime mortgages are available from 50 and require interest payments for an agreed period. Home-reversion minimum ages and all other eligibility rules depend on the provider. Check the youngest applicant’s age and the actual product criteria. Eligibility depends on the product, age, property, credit circumstances and any required affordability assessment. Minimum property values and borrowing limits are lender-specific. An existing mortgage normally has to be cleared at completion, often using some of the released funds.

A lifetime mortgage usually becomes repayable after the final borrower dies or moves permanently into care, subject to terms. A home reversion follows its sale and occupancy agreement.

The property is commonly sold at that stage. Repayment of a lifetime mortgage may instead be possible from other funds; a reversion provider is entitled to its agreed ownership share.

Why do people consider equity release?

As mentioned, older homeowners usually consider equity release plans so they can improve their life during retirement, which could include general expenses, home improvements, holidays, private medical services and much more. 

Some people use equity release as a way to give their loved ones an earlier (less valuable) inheritance to help buy a property or make investments. There can still be inheritance tax implications if money is given away within seven years of death. 

Equity release can be a bit complex to understand without the right information, so here’s a quick table with some do’s and don’ts to make things clearer.

Equity Release – DO…	Equity Release – DON’T…
DO Discuss your purpose, affordability, alternatives and future needs with a qualified equity-release adviser. Borrowing to repay debts or give money away can reduce your financial security.	DON’T proceed under pressure or without understanding estate, benefit, care-funding, interest and fee consequences.
DO Seek professional advice from professionals who specialize in equity release.	DON’T Rush into a decision. Take your time, you are in control on this.
DO Understand the difference between lifetime mortgages and home reversion plans – and which is best for you.	DON’T Use equity release without fully understanding the terms.
DO Check for flexibility – look for plans that let you be flexible, like making partial repayments.	DON’T Forget to look at alternative options for raising funds.

How can you do it?

The two main types are legally different: a lifetime mortgage is secured borrowing, while home reversion sells property rights.

Unpaid lifetime-mortgage interest can compound. A home reversion has no loan interest because it involves a sale, with a different cost structure.

How much money could you release?

The amount available depends on age, property, ownership share, product and provider criteria. There is no universal 60% lifetime-mortgage or 80% home-reversion maximum. See related guidance.

Ask for an individual illustration showing the advance or purchase price, fees, future cost and any retained ownership share.

What is a home reversion scheme?

A home reversion plan is a sale of part or all of your home, usually below open-market value, in return for money and the right to remain under the plan’s occupancy terms. It is not a loan. The provider receives its agreed share when the home is sold. See related guidance.

The provider buys a share below open-market value because you retain occupancy rights under the plan. Its eventual return depends on the agreement and property value.

Illustration only: selling a 75% share for cash equal to 20% of today’s full property value gives the provider 75% of the future sale proceeds under the agreement. This is not a loan or a quoted market offer.

» TAKE ACTION NOW: Find out how much equity you could release

What is the minimum age for a home reversion plan?

Home-reversion providers set their own minimum ages, often higher than standard lifetime-mortgage ages. Check the actual plan and youngest applicant.

All applicants and owners must satisfy the provider’s rules. The permitted ownership and applicant structure is product-specific.

Are they regulated?

Home reversion lenders are regulated by the Financial Conduct Authority. You should only consider an equity release scheme that is offered by a legitimate lender that is authorities and regulated by the Financial Conduct Authority, otherwise, you are dealing with illegal companies. 

The Equity Release Council is a voluntary industry standards body, not a statutory regulator. Check both FCA permissions and the particular product’s safeguards.

Is it a good idea?

A home reversion plan can be a good idea for some people, and for others, there may be better alternatives. 

A home reversion reduces the share of the property retained for the estate, so inheritance priorities should be discussed before selling any share.

You should get reputable financial advice to inform your decision. 

How does a reversion company calculate its offer?

The provider assesses the price for the share purchased using factors such as age, property value and occupancy terms. This is a purchase offer, not a loan limit.

You can usually get an idea of how much money you could release by using an equity release home reversion calculator. 

What is a home reversion plan calculator?

A calculator gives an illustration based on stated assumptions. A borrowing-limit estimate and a compound-interest projection answer different questions. Neither is a lending offer, approval or suitability assessment; actual terms require a valuation, checks and specialist advice.

A lifetime mortgage equity release calculator uses interest rates because interest is applied to those loans, whereas a home reversion equity release calculator does not incorporate an interest rate because no interest is charged. 

A reversion illustration should distinguish the cash paid from the ownership share sold and explain future sale proceeds and costs.

Where can you find a home reversion plan calculator?

A home reversion equity release calculator can usually be found directly on home reversion lender websites. You may also find them on generic websites discussing and explaining how equity release works, including forums. 

Another place you might spot them is on financial service websites, such as financial advice companies and brokers.

Lifetime mortgage equity release calculator

A lifetime mortgage equity release calculator uses your estimated property value and age to project the amount of money you could release and how much your debt would grow over different time periods. The calculator uses your property value estimates and a representative interest rate, so it may not be entirely accurate. 

Should I trust a home reversion plan calculator?

A calculator is only a guide. A provider’s actual purchase offer and legal terms may differ after valuation, underwriting and advice.

Drawdown vs lump sum home reversion plan

Some arrangements may offer staged payments or later sales of further shares. Availability and pricing must be checked in the actual contract.

Do not assume that undrawn money is a loan reserve available on demand. Check how any later payment is agreed and calculated.

Compare the actual staged-payment terms with taking a lump sum; home reversion has no loan interest but timing and sale terms can affect the outcome.

1. Budgeting – it could help you budget throughout retirement or large home improvement projects. 
2. Means-tested benefits: retained capital can affect entitlement. Obtain advice about limits, disregards and deprivation-of-capital rules; staged payments do not guarantee protection.

What is the Equity Release Council?

The Equity Release Council is a group striving to improve standards and the reputation of the equity release sector. They do this by offering memberships to any company working in the industry, including equity release providers. 

One way that the council aims to improve standards is through the group’s rules and guidelines. Every member must abide by these rules, which have predominantly been written to give senior homeowners greater protection, assurance and peace of mind. One of the most important rules they have made is the negative equity guarantee for people taking out lifetime mortgages. 

How does a lifetime mortgage work?

A lifetime mortgage is a loan secured on your home; you retain ownership. Interest that is not paid is added to the balance. The loan is usually settled when the last borrower dies or moves permanently into care, subject to the contract. Required or optional repayments vary by product.

By the time the homeowner needs to repay, the interest will have rolled up continually and made the total owed grow significantly. There are a number of variations of lifetime mortgages on the market. 

Should I use a home reversion plan or lifetime mortgage?

Lifetime mortgages remain more popular than home reversion plans, and the former is easier to find. However, this does not necessarily mean you should always choose a lifetime mortgage over a reversion plan. You should discuss all options with an equity release adviser first. 

Do I need financial advice before applying for equity release?

You need to get financial advice before applying for any type of equity release scheme. This is to make sure you understand everything about the equity release scheme and its long-term implications, including eventual costs. It is also used to explore alternative options and avoid equity release when possible and beneficial to do so. 

Will the loan be taxed?

A lifetime-mortgage advance is borrowed capital. Home reversion is a property sale; tax treatment, gifts and later income or gains require separate consideration.

Can I lose my state pension after releasing equity?

You cannot lose access to the basic state pension by releasing equity and increasing your personal wealth. It is not possible because the basic state pension is not a means-tested benefit. Nearly everyone has the right to receive it without wealth being considered. However, you may lose access to other benefits, including Universal Credit and Pension Credits. 

What are my other options?

Another way to create a lump sum of cash for your retirement is to move to a smaller property that is less valuable than your current one. By downsizing, you could create a pool of money to use for your retirement or any other purpose. But keep in mind the additional costs and stress of moving, especially in later life. 

Things to consider

Equity release includes lifetime mortgages and home reversion plans. A lifetime mortgage is a loan secured on your home; a home reversion plan sells part or all of the property. Equity release reduces what may be left in your estate and can affect means-tested benefits and future care funding. A lifetime mortgage is usually repaid when the last borrower dies or moves permanently into care, subject to the plan terms. Specialist financial and independent legal advice are needed. Any existing mortgage must normally be repaid from the proceeds or other funds. Age Partnership publishes an advice fee of £1,995 payable on completion; confirm the current fee in your personalised illustration. Lender and legal fees may also apply.

References

1. Legal & General – Equity release helps customers stay in their forever homes