Lifetime Mortgage vs Home Reversion Plan

What is a lifetime mortgage?

A lifetime mortgage is a loan secured against your home. You borrow a lump sum (or access a drawdown facility) and retain full ownership of your property. The loan, plus interest that rolls up over time, is repaid when the property is sold — typically when you die or move permanently into long-term care.

You are not required to make monthly repayments, though many products allow voluntary partial repayments (often up to 10–12% of the original loan per year without incurring an early repayment charge). Interest is fixed for the life of the loan.

Lifetime mortgages come in several forms: lump sum plans, drawdown plans, and enhanced products for those with certain health conditions or lifestyle factors who may qualify for higher loan-to-value ratios or better interest rates.

What is a home reversion plan?

A home reversion plan works differently. Instead of borrowing against your property, you sell a share of it — sometimes all of it — to a home reversion provider. In return, you receive a lump sum of cash. You continue living in the property rent-free for the rest of your life, under a lifetime lease.

When the property is eventually sold (on your death or move into care), the provider receives their percentage share of the sale proceeds. If you sold a 50% share, they receive 50% of whatever the property sells for — regardless of how much it has grown in value since you took out the plan.

The key feature of a home reversion plan is that you will receive considerably less than the market value of the share you sell. If your property is worth £300,000 and you sell a 50% share, you will not receive £150,000. You may receive £60,000–£90,000 — or less, depending on your age. The discount reflects the fact that the provider must wait an uncertain period (potentially many years) before receiving their share of the sale proceeds.

Why you receive less than market value in a reversion

Home reversion providers are taking on longevity risk. They do not know how long you will live — and therefore how long they must wait before realising their investment. The older you are when you take out the plan, the closer (in actuarial terms) the provider is to receiving their return, and the higher the percentage of market value they will pay.

For a 65-year-old, the discount might be very substantial — the provider is potentially waiting 20–30 years. For an 85-year-old, the discount is smaller. This is the inverse of how lifetime mortgages work, where older applicants can borrow a higher proportion of their property's value.

The implication is clear: for most homeowners, and particularly younger ones, a home reversion plan delivers poor value compared to a lifetime mortgage.

Market share: why lifetime mortgages dominate

Lifetime mortgages account for well over 99% of equity release completions in the UK. Home reversion plans represent a tiny fraction of the market. This is not by chance.

The discounted value issue makes home reversions unattractive for most borrowers. Additionally, lifetime mortgages have become considerably more flexible in recent years — with drawdown options, voluntary repayment features, inheritance protection guarantees, and competitive fixed rates — making them suitable for a wide range of circumstances.

The Equity Release Council publishes market data that consistently shows lifetime mortgages as the dominant product. Home reversion plans are rarely recommended by advisers except in very specific situations.

When home reversion might suit

Despite being a niche product, home reversion has some specific applications:

• Advanced age: At 80 or 85+, the discount on market value is smaller, making the deal more equitable
• Fixed inheritance planning: Selling a specific share means the remaining percentage goes to beneficiaries with certainty — regardless of how the property market moves
• No interest accumulation: Because you are not borrowing, there is no interest to roll up — which may appeal to those concerned about compounding
• Health considerations: Some providers may offer better terms for those with reduced life expectancy

Even in these situations, a specialist whole-of-market adviser would need to compare the home reversion offer against what a lifetime mortgage could provide before making any recommendation.

The regulation difference

Both lifetime mortgages and home reversion plans are regulated by the Financial Conduct Authority (FCA). Both are eligible for Equity Release Council membership, and ERC-approved products of both types carry the Council's consumer protection standards.

This means that regardless of which type is used, consumers have access to FCA regulation, the Financial Ombudsman Service, and (if the product is ERC-approved) the additional protections of the ERC Standards — including the right to remain in the property for life.

For more on regulation and consumer protections, see what is the Equity Release Council and our guide to is equity release safe.

Side-by-side comparison

Further reading

For a full explanation of the types of equity release, see our guide to types of equity release. To understand how lifetime mortgages work in practice, see how equity release works. For a comparison of lump sum versus drawdown lifetime mortgages, see lump sum vs drawdown equity release.