Using Equity Release for Care Home Fees

Equity Release for Care Home Fees: A Guide for UK Homeowners

How Can an Equity Release Mortgage help with Care Fees?As we get older, one of the biggest financial concerns for many is how to fund potential long-term care costs. With residential care homes in the UK costing an average of £704 per week for a nursing home, these costs can quickly deplete a lifetime's savings if plans aren't made in advance.[1]

For homeowners, one option that is becoming increasingly popular is using equity release to pay for care home fees. Equity release allows you to access some of the value tied up in your home, providing a cash lump sum or regular income to cover care costs without having to sell your property.

But is equity release for care home fees the right solution for you? In this guide, we'll explore how it works, the pros and cons to consider, and some key tips for using equity release as part of your long-term care planning.

 

How Equity Release Can Fund Care Home Fees

There are two main types of equity release plans that could be used to fund residential care home fees:

 

Lifetime Mortgage:

With this option, you take out a loan secured against your home. The loan amount plus rolled-up interest is repaid when you die or move into permanent long-term care. Many lifetime mortgage providers allow you to opt for ad-hoc lump sum withdrawals or regular monthly payments to cover care costs.[2]

 

Home Reversion:

You agree to sell all or part of your home in exchange for a tax-free cash lump sum, while retaining the right to continue living there. When you die or move into care, the property is sold and the reversion company keeps their share of the proceeds.[3]

In either case, the money received from the equity release plan can be used to pay care home fees. Any remaining funds left after care costs could be used for other expenses or left as an inheritance.

Expert Equity Release Advice

Speak with a Specialist

ARRANGE A CONSULTATION

The Pros of Using Equity Release for Care

There are several potential benefits to using equity release specifically for long-term care planning:

  • Allows you to access funds tied up in your home to pay for care
  • Means you don't have to sell your home to cover costs
  • Provides peace of mind and security about future care provisions
  • Protects other assets and savings from being depleted by care fees
  • Tax-free cash sum can cover large upfront costs like deposits
  • Option for regular payments to fund ongoing monthly fees
  • Preserves more inheritance for loved ones vs selling your home

The Cons to Consider

However, there are also some downsides and risks to factor in:

  • Compound interest can mean the total debt grows quickly over time
  • Means reducing the value of your remaining estate/inheritance
  • Some plans may have expensive fees, early repayment charges etc.[4]
  • Required to take qualified financial advice which incurs fees
  • May impact your entitlement to state benefits or NHS support[5]

The Equity Release Specialists

Book a Consultation Today

GET EXPERT ADVICE

Using Equity Release for Short vs Long-Term Care

One important consideration is whether you need short-term temporary care or expect to require long-term permanent care. For relatively short stints, drawing out small lump sums may be most cost-effective. But if long-term care is likely, an option like a drawdown lifetime mortgage providing regular income may be better.[6]

Tips for Using Equity Release for Care Home Fees

  1. Start planning early before care needs arise
  2. Get specialist financial advice to assess viability and costs[7]
  3. Consider products with inheritance protection features
  4. Explore other options like savings, investments, pensions etc
  5. Check you won't be hit by benefit entitlement penalties
  6. Use local authority free advice services to understand care fees assistance[8]
  7. Ensure your home meets the qualifying criteria for equity release[9]

Overall, equity release can be a solution to help fund care home fees later in life. But it requires careful planning and consideration of all the alternatives to ensure it is the best option for your individual circumstances.

 

Expert Equity Release Advice

Speak with a Specialist

ARRANGE A CONSULTATION