Home reversion: a risky approach to equity release

Home reversion is gaining popularity as a means of releasing equity across the UK, despite warnings from the Financial Services Authority that this form of equity release is “highly risky” and largely unregulated.

Homeowners – especially pensioners – should be aware that even though home reversion schemes may promise quick-fix, interest-free solutions to their financial problems today, chances are that there will be serious repercussions tomorrow.

Read on for more about home reversion, the risks involved, and finally, why a guaranteed cash sale to an established property buyer such as MPG Investments is a simpler – and safer – equity release option.

What is home reversion?

Essentially, home reversion is a type of equity release whereby a homeowner sells their property, or a percentage of it, to a property investment company for cash.

Equity release schemesare becoming increasingly popular among property-rich, cash-poor pensioners who are finding it difficult to cover their day-to-day living costs. But is it wise for them to gamble with their most valuable asset?

Debt-ridden and desperate property owners are also turning to equity release loans such as home reversion to ease their financial predicaments. They need to bear in mind, however, that this will only bring temporary relief, as their debt will have to be settled sooner or later. It all comes down to this: how can you justify settling old debt by signing up for new debt? It simply isn’t a financially responsible decision.

Take a moment to consider the disadvantages of equity release

The major attraction of home reversion as a means of freeing up cash is arguably the promise of instant gratification. Firstly, homeowners can live on in their own homes just like before, even though the property does not technically belong to them anymore. Hence, they can enjoy all the benefits of the cash loan without disrupting their lifestyles in the least.

Secondly – and most appealing of all – home reversion loans are usually interest free. The lender normally grants the loan on the premise that the original sum – as well as the cumulative interest – will be repaid in the event of the homeowners’ death, or alternatively, when the property is sold.

Blinded by the above-mentioned instant benefits, homeowners often forget to stop and think about the serious disadvantages of home reversion.

Firstly, if you take out a home reversion loan, your family won’t be able to inherit the house after your death. As per the agreement, your home will be sold, and the property investment company will keep the money to settle your account. This is often not realised by homeowners, as some unscrupulous companies strategically fail to mention all the details before the contract is signed.

Secondly, property prices are known to rise. Consider the following example to understand the significance of this fact in terms of home reversion. If John decides to release 40% of his home equity today, he will have to pay 40% of his home’s total market value when he sells his home in 10 years time. Chances are that the percentage will be worth much more in the future. Despite the accumulated interest which he will have to subtract from his selling profits, he will be obligated to repay much more money than he borrowed in the first place!

The fastest, easiest – and safest – way to sell your home

Sell your property to MPG Investments and circumvent the inherent risks of home reversion and other equity release schemes. Thanks to our experience, expertise and financial muscle, we can buy your home in just 7 days. That’s right, in less than a week the cash can be in your account and you can begin to address your financial situation!

What’s more, you can take advantage of our innovative offer to Sell and Rent Back. This way, you can rent your own home back from us at an affordable rate after selling, and so avoid the stress of finding accommodation elsewhere, as well as the hassle of moving itself! Once you’ve regained financial control, you can save to re-enter the property market as a cash buyer.

What are you waiting for? Call us on 0800 634 9231 and learn more about the amazing property solutions that are in store for you!