Equity Release to Pay for Care
Releasing equity in your home is one way which you may be able to pay your care home fees and still keep your home.
If you have been assessed by the Local Authority and are not entitled to receive help with care home fees, or are only entitled to partial help, you may well be worried about having to sell your family home. To find out more about care home fees and paying them, see our article Your Contribution to Care Home Fees.
About Equity ReleaseEquity release plans sometimes go by the alternative names of lifetime mortgages or home reversion scheme, although these terms mean different things.
- Home reversion schemes involve selling all or part of your home.
- A lifetime mortgage involves borrowing money against the value of your home, to use however you wish. You repay the money when your house is sold.
You may receive the money from an equity release scheme as a lump some or as a regular income. If you are considering using money from equity release to pay for your care home fees, it is most likely that you will opt for a regular income system.
EligibilityThere may be some conditions on being accepted for an equity release scheme, such as:
- You must usually be aged over 60
- Your mortgage should be paid off in full
- Your home must be in a good condition
The conditions will vary on an individual and scheme-by-scheme basis.
Advantages of Equity ReleaseThere are a number of reasons why equity release schemes are attractive to homeowners who need to pay for care fees.
- Equity release allows them to keep their own homes, or part of them. This is very important to many, at a time which can be emotional and upsetting.
- Equity release can be a way of cutting down on inheritance tax.
- Money released from equity release, on your main property, is tax free. Although you will have to pay tax on anything you make if you reinvest it.
- An equity release scheme may still ensure than your children and family receive some inheritance from the value of your property. There is often enough equity left over after the house has been sold and the debt paid off.
Important Factors to Bear in MindAlthough equity release schemes are attractive to many as a way of paying their care home fees, it’s important to proceed with caution and investigate things thoroughly before going ahead. Choosing an equity release plan is a big decision.
Experts in the field strongly advise that anyone considering an equity release scheme consults an independent financial advisor first.
It’s important that a financial expert examines all aspects of the equity release agreement, including the small print. There have been concerns that some equity release schemes have been unfair to a minority of homeowners.
You must also be aware that although an equity release plan may still allow you to leave an inheritance for your children, it will be significantly reduced and they will not inherit the actual home itself. Most families will completely understand should you wish to go ahead with an equity release plan, but it is worth talking it over and explaining the details to them.
One alternative way to these types of equity release schemes is to sell your property and move to a smaller one.