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Home reversion

E

Edward chong

Member
Hi,

I would like to ask that:
1. Can policyholders unwind home reversion plans by voluntarily “buying back” part of their houses from insurers? Are there any penalties?

2. If a homeowner dies shortly after taking a lifetime mortgage (e.g. a month), will the product provider sells the property or the deceased’s family members have an option to pay interest due & repay loan? If the latter option is available, in general, what is the acceptable range of period length for this option to apply?

Thank you.
 
Last edited by a moderator:
Hi Edward

Bear in mind that you won't need to know details like this for the exam as they aren't covered in the Core Reading.

What happens on repayment of a lifetime mortgage (including early pre-payment) will depend on the specific terms of the contract and can vary between providers. But generally speaking, the outstanding mortgage can be paid off with cash rather than forcing the sale of the property.

In terms of the home reversion, there similarly may be a clause in the policy (depending on the contract) allowing the policyholder to buy their house back. However, this would have to be done at the then full market value (for whatever proportion has been "sold") and this would normally be higher than the amount released under the reversion. Given that there would also be transaction fees involved, this can be an onerous action.
 
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