Can you sell your house and still live in it?

What options are available to sell your home and still live in it?

The idea of selling your home and yet still live in it rent-free, for as long as you please, might seem like a fantastical one, but it is actually possible.

How long you will be able to stay in a home you have already sold is dependent on who you sell your property to. There are two categories of home buyers who offer different options, concerning your living in a house after you’ve sold it. One category of home buyer can let you stay in the sold house rent-free until your demise, while the other category of buyer will let you live in the house as a temporary measure till you are ready to relocate.

Selling your house and living in it like an owner

You can accomplish this by selling your property under a Home Reversion Plan.

By selling your home under a home reversion plan, you get to sell either the whole of your property or just a part of it, in exchange for either a one-off cash payment or a regular income. There are certain home buyer firms that combine both forms of payment by first paying a lump sum, followed by subsequent payments over a length of time. After selling your home under such an arrangement, you’ll still have legal rights to live in the property until your demise or at which point you choose to move out. Throughout the period of stay in your already sold home, you are under no obligation whatsoever to pay rent or any other form of fee to the firm that has bought your home.

Also, depending on your given circumstances – such as medical conditions or your age – you might be able to access more funds from the purchaser of your home, after the initial purchase price has been paid to you.

How does a home reversion work?

You can take part in a home reversion scheme by selling your home to a firm that offers such services and is willing to either buy your home in part, or in whole. You will be paid cash either as a lump sum or an agreed-upon income for the duration of your stay in the sold house.

If you opt for the option of being paid a lump sum, you can invest the money in a manner that will ensure you receive a regular income. A typical home buyer who agrees to a home reversion can offer the seller anywhere between 30 and 60 percent of the estimated market value of the property. How much the buyer chooses to pay is dependent on various circumstances, such as the quality and location of the property, as well as the age of the seller.

While staying in the house that you have already sold, the buyer is obligated to ensure the following:

  • That you can continue to live in the house without hindrance and without paying rent until either your demise or when you chose to move out.
  • That the property isn’t sold, as long as you are still alive and living in it. The terms of your occupancy will depend on the terms of the reversion scheme you opt for.

If you enter a home reversion scheme at an older age, you are more likely to receive a payment that’s much closer to the true market value of the home in question.

Which is better between a Full and Partial home reversion plan?

The most ideal home reversion plan for a homeowner is dependent on the circumstances of the seller and the long term benefits he/she intends on gaining.

If you opt for a Full Home Reversion Plan, you’ll be outrightly selling all of your legal ownership in a home. This means that you will no longer have any ownership title or claim on the property in question. On the other hand, you could opt for a Partial Plan in which you’ll be selling only a part or percentage of your title to the property. By going with the option of Partial Reversion, you have the option of selling – at a later date – more of your remaining share of the property.

If you wait till years later before selling the percentage of your property that remains, chances are you can sell it at a higher price, because you’ll be older. This is because the older a homeowner is, the less time he/she will be expected to live, which will lead to such a homeowner receiving a higher sum from the subsequent home reversion scheme.

Is a home reversion scheme right for you?

You need to keep in mind that a home reversion scheme is a high-risk product that can have a significant effect on yours taxes, long term financial planning, inheritance and benefits. This is why it is strongly advised that all clients get reliable financial advice before attempting a home reversion scheme. With the proper guidance, you’ll be in a better position to determine if you stand to lose more or gain more by opting for this scheme.

If you have limited options concerning how to raise finance and are willing to release equity from your home in exchange for cash, pursuing a reversion scheme can prove to be a favourable choice. This is especially true if you are in need of cash quick, but don’t want to lose the roof over your head and have no intention of leaving your property as an inheritance to (perhaps) family members.

Any cash the scheme releases to you might imply that you are no longer the full and rightful owner of your home, but that doesn’t mean you will not be personally responsible for seeing to its upkeep. You will have to care for the property to make it habitable for yourself – and that’s just one of the expenses which the money released by the scheme might end up paying for.

Also, while you have the right to stay on the property rent-free for the rest of your life, you will still be obligated to satisfy the terms of your lease, which can include you being liable for costs like ground rent. If you feel such costs will be too much to handle – or that such a deal is unfair – then perhaps a home reversion scheme isn’t the right choice for you.

Typically, homeowners to whom home reversions are best suited are seniors between the ages of 70 and 75.

Also, if you opt for a partial home reversion rather than a full one, the percentage of your property that is unsold will still belong to you and is something your relatives can inherit upon your demise. This means you can sell your property for cash, still live in it until death, yet still have something left for your family to inherit.

 

Are there costs associated with a Home Reversion Scheme?

Opting for a home reversion scheme isn’t entirely free as you’ll still have to pay for:

  • The maintenance of the sold property, of which you are no longer the rightful owner.
  • An arrangement fee to the buyer offering the reversion scheme.
  • Fees for valuation that will be carried out to determine the market value of your property before sale. It’s advised that you never accept at face-value a valuation offered by the scheme provider. This is because they might ‘low-ball’ your home’s value to suit their purposes.
  • Legal fees.

Are there any other options aside from Home Reversion Scheme for quick cash?

You could pursue the option of selling your property to a cash for home company. These type of companies will buy the entirety of your property within a few days and pay you in cash. The condition of the property or the location doesn’t matter. As long as you agree to sell your property at less than its market value, a cash for home buyer will be willing to trade.

Like with a Home Reversion Scheme, a cash home buyer can let you stay on the property even after you’ve been paid and the transaction has been finalised. But unlike a reversion scheme, your staying isn’t for life. It is temporary and its duration is dependent on the agreement you’ve made with the buyer.

Advantages of Home Reversion Scheme

  • You can receive a single lump sum payment that covers the cost of the sale of your property. The money offered by the reversion scheme will be dependent on your predicted life expectancy.
  • You get to continue living in your home rent-free, even though you’ve sold it.
  • If you sell only a portion of your home, the percentage left to you can be inherited by your family, regardless of how small the remaining portion is. Also, you will continue to benefit from any growth in the value of the portion of property you still own.
  • Home Reversions can be cheaper than Roll-Up Lifetime Mortgages in the long run.

Published on 31st October 2017

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