If you are in need of specialist care but are dreading the idea of packing up your entire home to move to a small room at a facility, equity release can pay for the care!

In fact, it may just be the ideal solution in these circumstances.

With the average UK-based retiree living until 75¹, equity release can help you spend your older years as comfortably as possible.

Our team at SovereignBoss is driven to help UK seniors in their pursuit of a financially secure retirement.

Therefore, we are constantly analysing the latest retirement trends to provide up-to-date information.

Therefore...

How Can Equity Release Be Used to Pay for Care?

There are many reasons for equity release, one of which is that it can be used to pay for various needs, such as residential care for you or your partner, in-home care, home improvements, or private medical care. 

It can also fund an immediate needs annuity without requiring you to sell or vacate your property.

A detailed breakdown of each:

Equity Release to Pay for Residential Care for Your Partner

Equity release is an option to consider when you need to fund residential care for a partner and still want to stay in your home. 

After all, more than half of UK people are required to pay for a care home.²

For example:

If you live in England and have assets over the value of £23,250, you will need to cover these costs.³

*These figures may differ in other parts of the UK.

With the average cost of care-home fees sitting between £27,000 and £39,000 annually, and up to £55,000 with additional nursing,⁴ equity release may be a potential solution for you.

Ensure you speak to a financial advisor or broker and weigh up all your options before considering equity release to pay for your partner’s residential care in the UK.

Equity Release to Pay for Home Care

Equity release to pay for home care can mean that you have the help you need, whilst still living in the comfort of your property.

Before paying, discover if you qualify for your local authority to pay for a home carer.⁵

If not:

The cost of in-home care will differ in various parts of the UK, but you can expect to pay approximately £15 per hour.⁶ 

If the idea of moving to long-term care does not appeal, or need part-time assistance, you can unlock the value of your estate and still live in it. 

The best part is that you will retain ownership.

Equity Release to Pay for Home Improvements and Adjustments

You can use equity release to pay for home improvements and adjustments if your property is not equipped for elderly homeowners.

Consider these changes to support you or your partner’s needs:⁷

• A banister or stair lift on your stairs
• A bath lift, bath rail, or walk-in shower
• Widening your doorways for easier access
• Lowering your kitchen worktops, especially if you are wheelchair-bound
• A rail on your stairs or an outdoor ramp
• Outside lighting or an intercom system

First, discover if you qualify for a Disabled Facilities Grant⁸ or a grant from Independence at Home.⁹

Equity Release to Fund Private Medical Insurance

You can use equity release to fund private medical insurance, which costs approximately £1,000 per year.¹⁰

Medical insurance means faster access to private healthcare and, usually, faster treatment.

Equity release ensures that the cost of medical care does not become a barrier to receiving the best possible healthcare.

Equity Release to Pay for an Immediate Needs Annuity

Using equity release to finance an immediate needs annuity provides a reliable, lifetime income to manage care costs. 

This strategy involves unlocking the equity in your home to secure a consistent income, which can help address continuing care expenses, hence offering financial stability and peace of mind for the future.

These plans entail a tax-free income paid to your registered care provider for the rest of your life. 

However:

They necessitate a significant initial investment, typically starting from £7,500.¹¹ 

The costs are individually priced, based on:¹²

• The amount of income you want it to eventually provide
• The option you select
• Your age and medical history

In essence, by tapping into the equity in your home, you can create a reliable income stream to cover ongoing care costs, contributing to long-term financial security.

Immediate needs annuities are designed to be purchased in later life.

Equity Release Options for Care Funding

The equity release options you can use when paying for care funding are either a lifetime mortgage or the less popular home reversion scheme.

A lifetime mortgage is a loan secured on your home which does not need to be repaid until you die or move into long-term care. 

On the other hand, a home reversion plan entails selling part or all of your property for a one-time payment or ongoing instalments. 

You will usually maintain the right to reside in the property without rental charges until you pass away or relocate to a care facility but you will relinquish full or part ownership of your property.

Both options can provide the needed funds for care, ensuring a more comfortable and secure retirement.

What Are the Pros and Cons of Using Equity Release to Pay for Care?

There are pros and cons of using equity release to pay for care, including that you will receive tax-free cash, but it will reduce the value of your estate.

More information:

Advantages

The most significant benefit of equity release is immediate access to funds for care without having to sell or leave your home. 

Additionally...

This arrangement allows for financial flexibility, provides an income stream or a lump sum, and could improve the quality of life by enabling access to better care options.

Disadvantages

The disadvantages of equity release include reducing the value of your estate, which means you will have less to pass on to your heirs. 

Also, it may impact your eligibility to qualify for means-tested benefits. 

Lastly, as interest accumulates over time, it can significantly increase the amount that will be owed when you pass away or move to long-term care.

The Impact of Equity Release on Your Entitlement to Help With Care Fees

Equity release can indeed have an impact on your entitlement to state help with care fees. 

Generally, if you own your home and have significant equity in it, you are expected to use this to help fund your care before you are eligible for state assistance.

When you release equity from your home, it typically increases your cash savings or income. 

This could potentially affect means-tested benefits and services that you receive, such as help with care fees. 

Local authorities conduct a means test to assess whether you are eligible for financial assistance for care. The means test takes into account your income, savings, and property (including any equity released).

Consider professional advice to understand how equity release may impact your entitlement to care assistance.

Common Questions

In Conclusion

Equity release to pay for care presents a viable financial solution for many homeowners in the UK. 

It enables individuals to unlock the value tied up in their homes to fund various care needs without selling their property. 

However, it is critical to consider the potential impacts, including reduced inheritance and possible effects on state benefits. 

After all, it reduces the value of your estate.

As with any significant financial decision, it is advisable to seek professional advice to ensure you fully understand the implications and whether equity release is the right choice for you. 

Always remember, using equity release to pay for care is not just about meeting immediate needs, but also planning for a secure and comfortable future.