Last reviewed: June 2026
TL;DR- A home reversion plan involves selling a share (or all) of the property to a provider at below market value, in exchange for a lump sum or income, while retaining the right to live there rent-free for life.
- The provider receives their share of the eventual sale proceeds when the property is sold after the homeowner dies or moves into care.
- The discount on the share sold (below market value) compensates the provider for the deferred return and reflects the homeowner's age and life expectancy.
- Home reversion plans are less common than lifetime mortgages and are regulated by the FCA.
How Home Reversion Works
In a home reversion plan, the homeowner sells part or all of their property to a reversion company in exchange for a cash lump sum or regular income payments. The homeowner signs a lifetime lease giving them the right to continue living in the property rent-free until they die or move permanently into long-term care. When the property is eventually sold, the reversion company receives its share of the sale proceeds. If the homeowner retained a share, their estate receives the corresponding proportion of the sale price.
For example: a homeowner sells 60% of their property to a reversion company and retains 40%. When the property is sold, the reversion company receives 60% of the sale price and the estate receives 40%. If the property has appreciated significantly, the reversion company benefits proportionately from that growth.
The Valuation Discount
The cash received for the share sold is always below the open market value of that share, because the homeowner retains the right to live there indefinitely. The reversion company's return is deferred until the property is eventually sold, and they cannot sell or occupy the property while the homeowner is alive. The discount reflects this deferral and the homeowner's life expectancy. Older homeowners receive a higher percentage of market value (smaller discount) because their expected life expectancy is shorter. Younger homeowners receive a much smaller proportion of market value.
Typical reversion proceeds as a percentage of open market value might be: approximately 30-40% at age 65, rising to 50-60% at age 75 and higher at older ages. These are illustrative figures - the exact terms vary by provider.
Home Reversion vs Lifetime Mortgage
The two main differences between home reversion and a lifetime mortgage are:
- Ownership: in a lifetime mortgage, the homeowner retains full ownership of the property and the loan is a debt secured against it. In a home reversion, ownership of the sold share transfers to the reversion company.
- Interest: a lifetime mortgage accrues interest, which compounds over time. A home reversion involves no interest - the provider's return is the share of the eventual sale proceeds, which may be higher or lower than the amount they paid depending on property price movements.
Lifetime mortgages are significantly more common in the UK market. Home reversion plans are used less frequently but may suit homeowners who want certainty about what share of the estate will pass to beneficiaries.
FCA Regulation
Home reversion plans are regulated by the FCA as a home purchase plan under the Regulated Activities Order. Independent advice from an FCA-authorised equity release adviser is mandatory. The Equity Release Council sets voluntary standards for member home reversion providers.
Frequently Asked Questions
Can I sell 100% of my property under a home reversion plan?
Yes. Some home reversion providers allow the homeowner to sell their entire property. In this case, all of the eventual sale proceeds go to the provider and nothing passes to the estate from the property sale. The homeowner receives the maximum cash sum at outset in exchange for relinquishing their entire ownership interest. Most homeowners opt to retain at least a partial share to preserve some inheritance for beneficiaries.
What happens if I want to move house after a home reversion?
Moving house after a home reversion plan is complex. The reversion company holds an ownership interest in the current property. If the homeowner wishes to move, the reversion plan typically needs to be ported (transferred) to the new property, subject to the new property meeting the provider's criteria. Not all home reversion providers offer porting. If porting is not possible, the plan must be settled, which may involve the homeowner paying the provider the market value of their share, which may be difficult without the sale proceeds of the original property. The porting terms should be considered carefully before taking a home reversion plan.
Is a home reversion plan suitable for a younger retiree?
Home reversion plans are generally less economical for younger homeowners because the discount on the share sold is higher (the longer expected deferral period means a lower payout). A homeowner in their early sixties selling a significant share of their property might receive only 30-40% of its market value. Lifetime mortgages are typically more cost-effective for younger equity release customers. The suitability of home reversion depends on individual circumstances and should be assessed by a regulated equity release adviser.
Does a home reversion plan affect inheritance tax?
The share of the property sold under a home reversion plan is no longer part of the homeowner's estate - it has been sold to the reversion company. This reduces the estate's value and may reduce the IHT liability. However, the cash received from the plan is part of the estate if it has not been spent or gifted, and gifting the proceeds creates potentially chargeable transfers. The IHT implications should be discussed with a tax adviser.
