The idea behind a home-reversion plan is simple. You own your home but have no savings and need cash. You agree to sell your home but are allowed to remain living there as long as you want. You get a cash lump sum immediately and may get periodic payments until such time as you no longer live in the house.
Not always simple
Not all home-reversion plans are straightforward. Some may require you to pay rent to the new owner. Some may require you to sign up to the deal today but defer the actual sale for years so you have no real idea what you will be paid for the house.
Usually a company puts these deals together, either by finding a buyer for you (for a fee) or by buying the house from you.
Home-reversion plans can be marketed to property investors looking to buy property indirectly (by investing in the company) or directly. But – as investors in failed property schemes like Blue Chip and Merlot have found – the risks in property deals are often far from clear. While home reversion is a simple concept, it could become a nightmare investment.
Who offers them
Home-reversion schemes are rare in this country. Wellington-based company Silver Choice offered a niche product in the past, but managing director Richard Withell told us the company was not actively marketing it. The Silver Choice product was based on deferred sales and required those who sold their homes to pay rent after the property changed hands.
Rob Dowler, executive director of SHERPA (Safe Home Equity Release Plans Association), says home-reversion schemes could join SHERPA if they complied with the SHERPA code of practice. That means, among other things, any such scheme will have to guarantee the right to occupy for life (see Reverse mortgages for more on this).
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