Using your property to pay for care
Equity release can offer a solution when you need to fund care but your money is tied up in property that you wish to keep.
This might apply if you are paying for live in care in your own home or your are in a care home and have a property that you wish to keep.
CARE AT HOME
If you would like to receive live-in care in your own home and you have exhausted other forms of funding, you may wish to use an equity release scheme known as a lifetime mortgage.
Here you can borrow either a lump sum (which could be used to buy a care fees payment plan) or you can set up an arrangement where you have a reserve account on which you can draw down money when needed. Interest is only payable on the money borrowed.
A CARE HOME
If you are funding care in a care home you may be able to borrow money to pay for your care by taking out a lifetime mortgage on your existing property (it is usually better, if possible, to borrow money at a lower rate from your local authority - see 'Deferred Payments' below). Alternatively you may have an investment property that you wish to retain.
A lifetime mortgage will allow you to access some of the equity in your property so that you can fund your care and retain your property. Again you may be able to borrow a single lump sum or draw down on a reserve account when needed.
Where you are not living in the property concerned the range of options may be limited.
DEFERRED PAYMENT AGREEMENT
If you have been assessed as needing care by social services and you qualify under their financial rules you may be able to borrow money at a low rate from your local authority secured against the value of your home.
Each local authority sets its own rules but, providing they believe that there is sufficient equity in the property, most will allow you to pay the full private rate for your care. Most authorities will also allow you to rent your home under the scheme.
The DPA is not currently available for care at home and cannot usually be used where there is other borrowing already secured against the property.
We are independent advisers and work with you to arrive at a solution that meets your needs and with which you are comfortable. We will explore all options and ensure that you fully understand the financial commitment that you are taking on.
If some form of equity release borrowing proved to be right for you please remember that any money borrowed will need to be paid back at some point in the future with interest and this would usually happen if you chose to move into a care home or on death. This would mean that there would be less money available to pay for a care home or less money available for the beneficiaries of your estate. Taking equity from your property may result in the loss of some State benefits.
Equity release products are not usually available on retirement properties.
Equity release is a complex product with lots of options and there are risks to you, your property and your beneficiaries. It is important that you fully understand exactly the consequences of such a product before you proceed.
All money borrowed will need to be repaid at some point in the future plus interest. On most schemes interest is on a 'roll up' basis, which means that there are no payments due during the lifetime of the loan but you will end up paying further interest on interest payments. Taking out an equity release lifetime mortgage is likely to have a significant negative impact on your estate.
Although we are naturally cautious about recommending these schemes, there are many situations where they will allow you to have the care that you need in the location of your choice. We would be pleased to talk through the options and alternatives with you.