Home reversion plans now regulated
From today (April 6th) home reversion plans will be regulated in the same way as mortgages, offering increased protection for consumers.
Home reversion plans are a way of releasing money from your home, something that is becoming increasing popular as house prices rise ever-higher and fewer people invest in pension plans.
There are three main ways of releasing some of the money that has built up in your home.
The first is to simply move to a cheaper home, but this involves paying tax on the new home, estate agent fees, surveyors' fees, moving costs, and the soon to be introduced home information packs. And all of this comes on top of the stress and strain of moving house.
By contrast, home reversion schemes and lifetime mortgages let people stay in their home, and charge nothing until the person taking out the product dies or moves into permanent care.
Lifetime mortgages are simply home loans with the interest payments deferred until the property is sold. They generally include a negative equity guarantee to ensure the interest payments and original loan amount will never be worth more than the value of the property.
Home reversion schemes are more straightforward. Homeowners simply sell a percentage of their home, and when they die or move into permanent care and their home is sold this percentage returns to the home reversion plan provider.
But until today, while lifetime mortgages were regulated, home reversion plans were not.
From today firms offering home reversion plans must:
- Be fit and proper and appropriately resourced with staff competent to undertake this business
- Consumers should get clear, concise and consistent information about a firm's services and products on offer (including appropriate risk warnings) so they can make informed choices
- Consumers should get good quality advice and be sold suitable products which take account of their circumstances and needs, and
- If things go wrong, consumers are able to obtain redress, if appropriate.
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