Home Reversion Agreements & Associated Insurances
Core concepts
Home reversion questions test how a homeowner sells all or part of their home to a provider for a lump sum or income while retaining a lifetime lease to live there rent-free. Know reversion percentage, discount to market value (because the provider waits to realise value), no-negative-equity treatment, and valuation.
Compare with lifetime mortgages (equity release loans). Know associated insurances: buildings insurance, life cover, and long-term care planning. Understand suitability, independent legal advice, and cooling-off requirements.
Traps
- Confusing home reversion (sale of equity) with lifetime mortgage (loan against equity).
- Assuming the homeowner keeps full ownership - reversion transfers ownership of the sold share.
- Forgetting the discount applied because the provider does not get value until death or move.
- Overlooking that a reversion has no interest roll-up (unlike a lifetime mortgage).
Rule of thumb
Reversion = sell a share; lifetime mortgage = borrow against a share.
Worked example
A 70-year-old sells 50% of a €400,000 home. The provider applies a discount (say 40%), paying roughly €120,000 for the 50% share, while the client lives there rent-free for life.