Using Equity Release to Pay for Care

Should I Consider Using Equity Release to Pay for Care in 2022?
Contributors: Nicola Date, Katherine Read. Reviewed by Francis Hui
If you want to avoid residential care but can’t afford a caregiver, equity release could offer you the opportunity to stay at home with the support you need. Here’s more!

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Are you in need of additional care, but you’re dreading the idea of packing up your entire home to move to a small room at a care facility?

Equity release can pay for the care you need and might be the solution you’ve been looking for.

With the average UK-based retiree living until 75, it can help you spend your golden years as comfortably as possible.

But, do you qualify for an equity release?

We’ll help you determine:

  • Your equity release options to pay for care.
  • The benefits of in-home care.
  • The costs of this method.

Our team at SovereignBoss is driven to help UK retirees in their pursuit of a stress-free life.

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

Here’s our analysis of using equity release to pay for care in 2022.

Let’s find out now!


What’s Equity Release & How Does It Work?

Equity release is a UK-based retirement mortgage that has been safe to use since the inception of the Equity Release Council1 in 1991.

It allows you to unlock the equity that’s tied into your property without having to move to a new home.

Your property will serve as collateral against the loan, and no payments are required throughout the course of your life.

Instead, when you die (or need to go to a care home eventually), the home is sold, and your loan is covered. 

Using Equity Release to Finance Your Care

The UK caregiving industry is massive, with 97% of older homeowners opting for in-home care2 instead of the challenge of moving to a care home.

However, paying for care can be costly, especially if you live a long life.

If you’re over 55 and don’t want to move, but need care, then you can choose an equity release product to cover the costs.

The average annual cost of a live-in helper is £44,000 to £54,600 for full-time one-to-one care.

This implies that the typical 24-hour day costs around £120 to £150 per day in the UK.3

By using our equity release calculator, you can get an estimate of how much money you could possibly unlock with equity release and if it’s enough to pay for care.

You can generally unlock around 30% to 60% of your property wealth, depending on your age, you’re property’s value, and your health’s condition.

How Do I Arrange for an Equity Release on My Primary Residence?

If you want to arrange for an equity release on your primary residence, your best bet is to contact a whole-market financial adviser.

Such advisers have access to the entire industry so that they can find the best options for you and your family.

In addition, they will talk you through all the equity release alternatives.

Who Would Benefit From Using An At-Home Caregiver?

If you need assistance with domestic chores, want company in retirement, require help with medication and wound care,

Or require physical assistance, an in-home caregiver might be beneficial.

You choose the level of care you require, as well as how often you want it.

Finally, you may have daycare or around-the-clock care, or a helper who comes in a few times per week.

Are There Benefits of Using Equity Release to Pay for Care?

Yes, there are some fantastic benefits of using equity release for care, including that the money you release is tax-free.

Further benefits include:

  • You have the opportunity to select from a larger pool of carers, as their cost won’t be as much of a concern.
  • You will remain living in your home, rent-free, for the rest of your life.
  • No monthly payments are necessary during your lifetime.
  • There’s an option of paying back your monthly interest and up to 10% of the loan annually.
  • Once your home is sold, the money is used to pay back the final loan amount. If the loan exceeds the sale price, the balance will be written off.

Is It Risky to Use Equity Release to Pay for Care?

Yes, using equity release to pay for care does come with some risks.

Luckily, the Equity Release Council regulates the industry to protect the homeowner.

However, equity release pitfalls include:

  • You’ll reduce the overall value of your estate, impacting your inheritance income.
  • You have the choice of either selling your home below market value, or you’ll be subject to compound interest.
  • You’ll need to cover equity release costs.
  • Your qualification for means-tested benefits will probably be affected.

How Much Does Equity Release Cost?

The cost of equity release will range from £1,500 to £3,000, depending on your selected vendors.

You may need to cover costs for financial advice, arrangement fees or application costs, completion fees, solicitor costs, building insurance, and early repayment charges.

Is Equity Release Right for Me?

Equity release may be right for you if you’re interested in finding a caregiver.

However, it may not be suitable if you’re soon moving to residential care.

This is because if you permanently enter a care home, equity release plans demand that you fully cover the loan from the proceeds of your property sale.

How Much Can I Borrow with Equity Release?

The total amount of pounds that you can borrow with equity release will depend on your age, the value of your home, and your health condition.

Got Questions?

What Is the Average Cost of Care per Hour in the UK?

Can I Pay Off My Equity Release Plan Early?

Can I Volunteer to Pay Back Some of My Equity Release Loan?

In Conclusion

While equity release has its pitfalls, it can be a fantastic retirement product if done correctly.

Step number one is to contact a whole market financial adviser to talk you through the risks, alternatives, and if equity release is a good option for you and your family.

They can help you explore how equity release can pay for care, so you don’t have to leave your home.

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Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

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