|
Home reversion schemes, alternatives to equity release
‘ |
 | By: John Westwood
blacktower.financial@portugalresident.com
Could this work for you?
Most people when they discuss using the wealth that is tied up in their property think of equity release schemes.
For the vast majority who consider this type of wealth planning they would probably choose a form of equity release arrangement. However, there does remain an alternative to this – home reversion.
The scheme my company have introduced to the Algarve market place is based on the concept of granting a life tenancy, thus allowing the home owner to sell the freehold or bare ownership of the property while keeping their user rights. This concept in continental Europe is often called Usufruct or Viager.
The scheme is designed to provide the utmost flexibility, both in determining how you wish to access the released capital, by offering the option of receiving either a tax free lump sum or a life time annuity income. A combination of both is available depending upon your personal circumstances.
This type of arrangement may also be efficient when considering any inheritance tax planning. Your estate may benefit whichever option you choose. You also have the choice of leaving your property or renting it out and receiving additional income.
All of the above options use the legal structure known in English Law as a life tenancy. Within this structure, your rights as the occupant of the property are legally registered on the title deeds, which is a similar process to a mortgage, but more encompassing. Therefore your life tenancy is assured and the purchaser (which in my company’s case is a property fund) retains the bare ownership of the property.
How much would I receive
Typically the amount you would receive after the deduction of future maintenance costs in lump sum terms could result in you receiving up to 65 per cent of your property value. This may rise to nearly 80 per cent if you accept to receive instalment payments.
Some of the key benefits of home reversion can be described as follows:
Flexibility
You can choose to receive either a lump sum or a combination of a lump sum and an income stream depending upon your personal circumstances. The income stream provides you with extra monthly income either for life or for a fixed period of time. Additionally if you choose to move out of the property in the future you can rent it out to someone else and receive the additional rental income.
Release capital tax ef |
Have questions or comments on this article?
