Home Plus CEO Ian Higgins is on a mission to change the bad image of ‘home reversions’
Home reversions – where you sell a share in your home for a lump sum – are back.
Actually, they never went away. Residential Reversions, in business since 2001 and now trading as Home Plus, has spent the last three years working on a product that CEO Ian Higgins believes will provide a “social good” for an overlooked demographic.
“One-in-four problem debts are owned by people over 60. That’s to say nothing of people who have huge cash needs in retirement. That just wouldn’t be addressed, so we see quite a material need for this in the marketplace now,” Mr Higgins told the Irish Independent.
The firm has around €250m on tap and is backed by a plethora of institutional and wholesale investors, including Patron Capital, owner of its UK sister firm, Retirement Bridge.
Mr Higgins came on board with Home Plus after several years working with the Irish Bank Resolution Corporation (IBRC), Bank of Scotland and Merrill Lynch.
“I’ve been working since I was 13. I worked in Kingston’s [Hardware] on Pembroke Street, that’s where I started. And my grandfather was a painter and decorator.
"So I’ve been around property all my life.”
His work winding up portfolios at IBRC revealed for him a “huge issue” with problem debt among the over-55s.
Home reversions have had a chequered history in Ireland, and went largely unregulated before the financial crisis.
Age Action Ireland has criticised pre-crisis versions of the product for targeting vulnerable customers and offering them well below market value for a stake in their home.
Residential Reversions has been authorised by the Central Bank since 2008, and Home Plus is up front on its website about the fact that it may offer you “much less” than your property is worth on the open market. The product is different from other equity release schemes, such as life loans or lifetime mortgages, in that while you don’t fully own your own home, you don’t have to pay monthly interest on a loan – although if you want to release more cash, you may need to pay monthly fees.
The company calculates this based on current house prices, inflation and general life expectancy.
It generally buys 20-70pc of any one property, although homeowners can increase or decrease the stake – or buy Home Plus out – at any stage.
For example, a couple aged 67 and 70 with a house valued at €600,000 and who live a further 20 years can sell a 50pc share in their home for €150,000, if they pay €600 a month. They will get a smaller sum if they pay nothing.
As long as they continue to insure and maintain their home, nothing will change for them, and Home Plus will sell the property when they both die or go into long-term care.
“Everyone walks in on a transparent, ‘eyes wide open’ basis, so we avoid the ‘gotcha’ moments that sometimes can happen with life loans because always, from the very start, we know what share of a property we own and they own,” Mr Higgins says.
But Nat O’Connor, Age Action Ireland’s senior public affairs and policy specialist, says he “remains sceptical, to say the least” about the product they are offering.
“That seems an extraordinarily bad deal,” he said. “The risk is that people might believe that this is free money. That was what was going on during the Celtic Tiger.
“There are other ways to remortgage or take out a loan on your home.
"The question is whether this kind of product is really adding value or not.”
Mr Higgins insists the product is not intended to “capitalise on people’s misfortune”.
“One of the things I find slightly funny about it is the people who said, ‘You are preying on the most vulnerable elements of society’. Well, no one else was actually engaging to help those people do anything.
"So the alternative was they had no funding during that period. If they had taken down a life loan, which was the other option for them, those are the people whose kids have ended up on Joe Duffy.”
The company asks customers to seek independent financial and legal advice before signing any contracts with them, and says it offers “flexible” terms that are “compatible” with the rent-a-room relief and the Fair Deal nursing home scheme.
Mortgage brokers advise any interested homeowners to double check with the Revenue Commissioners or the HSE to verify whether the product does qualify.
Home Plus also offers an arrears resolution scheme for those who default on monthly payments, and will give back up to 50pc of the net profits they make on selling your house if you die within five years of signing up.
“Our duty of care is always to the homeowner, to make sure that they can stay in the home.
"We’re not here to act like a vulture fund in any way, shape or form. Actually, our motivations are the complete opposite: we want the homeowner to be in the home as long as possible.
“Hopefully we’re a positive impact on the market.”