Advantages and Disadvantages of Lifetime and Home Reversion Plans

Equity release schemes are of two types, lifetime mortgage and home reversion plans. There are advantages and disadvantages of both and are listed below:

Advantages of Lifetime Mortgage:

  • The ownership of the house is still yours and hence you are entitled or any growth in the value of the house.
  • You are eligible for the plan when you are as young as 55 years.

Disadvantages:

  • The borrowed amount can increase substantially as the interest accumulates and due to compounding effect.
  • The long term nature of the loans makes this a high interest mortgage when compared to other mortgage plans.
  • You may not be eligible for any further loans if you have borrowed a large part of the value of your home or if the prices of the house fall.
  • Prepayment charges may apply if you plan to pay the loan amount early
  • After the equity release if you live for a long time and he price of the house falls, it may be that there is no equity left for your family to heir.

Advantages of Home Reversion Plans

  • If you have not sold 100% of your share in the house, you still retain the share in the growth value of your house
  • You can still have eligibility for cash advances depending on the percentage of house sold.
  • The best thing, you know how much of your home you own
  • Disadvantages:
  • The home reversion plans may take longer to get executed and many companies have lot of selection criteria before they consider any property.
  • If you sell only a part of your house, you may not get full market value.
  • This is not beneficial if you die shortly after going for the plan. You may have ended selling a portion of your house cheaply.