Equity release to pay for care costs

At Care Co-operative we understand that no two people’s care needs are the same and although equity release may not be right for some care seekers, it is a perfect solution for others.

What is equity release?
Equity release allows you to release money from your property to generate an income or a one-off lump sum. This figure depends on the value of your house and allows you to generate the funds tied up in your property to use now rather than upon the sale of your home.

Generally, equity release is only available to homeowners over the age of 55 who own the house outright (no mortgage) and whose property is valued at £70,000 or more.

As your house is likely to be your biggest asset, it is important to find out as much information as possible about equity release before you make a decision. Equity release schemes are not exclusively used to fund long-term care but they are becoming increasingly popular with self-funding care seekers.

Equity release providers offer different options and it is important that the service they offer is the right one for you. Any sum that is released will have to be repaid, plus interest, when the house is sold and if your property is owned by a couple, the money is usually repayable on the death of the second person.

How do equity release schemes differ?
One of the most popular ways to release equity is by taking out a long-term loan, secured against your property, depending on the value of your house. This type of equity release is most appropriate for home owners who want to retain full ownership of their property.

Alternatively, a home reversion plan will involve selling all or part of your home in return for a regular income or a tax-free lump sum. All or part of your house will be sold to a home reversion company but you will be able to remain in the property as a tenant without having to pay rent. You would however, still be responsible for paying council tax and any applicable ground rent.

If you sign up for a home reversion plan, ownership of your property will revert back to the company when you or your partner dies or when you move into care. You can expect between 20-60% of the market value of your home when you arrange a home reversion plan.

It is important to obtain professional advice before you decide which option to take as a home reversion plan runs a higher risk option compared with a life mortgage and may carry implications for tax and inheritence.

How will equity release affect my care funding?
If the reason for releasing equity in your home is solely to fund your future care, you may find that there are financial implications which could affect the type of care you can afford. If this type of funding will only pay for your care for a limited time, you may need to consider how you will meet any additional costs.

You may not, for example, be able to cover the full costs of your care if your condition worsens and you need a more intensive care requirement in the years to come.

Who can I contact for more information about Equity Release?
Speak to a specialist advisor so that you can understand the pros and cons of the different equity release schemes and don’t end up overpaying now and in the future.

An advisor will also be able to help you choose the best option for your particular situation, review the terms of the deal and explain any risks involved and help estimate how much the scheme will cost.

All companies are likely to offering different terms and rates so it is worth shopping around to find the best option for you.