Equity Release & Long Term Care in 2022

Entering Long-Term Care? What Happens to Your Equity Release Plan?
Contributors: Nicola Date, Katherine Read. Reviewed by Francis Hui
If You Are Considering a Long-Term Care Facility in the Future, It Is Important to Know What Will Happen to Your Equity Release Plan. Most Homeowners Have an Equity Release Plan That Will Be Impacted by Their Move Into a Nursing Home.

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Equity release plans are becoming more and more popular as people over the age of 55 are looking for ways to fund their retirement.

As life expectancy increases, so does the chance of needing long-term care.

But what will happen if you need to go into long-term care? What happens with your equity release plan?

What Type of Equity Release Plan Do You Have?

What happens to your equity release scheme in long-term care1 depends on the type of equity release plan you have:

Individual (or Single) Plans

Individual plans are usually set up by a person who is on their own or has no partner.

They’re designed to provide for the individual throughout retirement.

If you select to have in-home care, you can remain in your house and your plan will continue.

You can even use your equity released to fund this care.

However, if you do move into a care facility, your plan will then come to an end.

The loan is then repaid through the sale of your house.

If your family wishes to, they can settle the plan and use alternative cash to pay back the loan, plus interest.

Joint Plans

Joint plans are usually set up by two people – a couple of friends or partners who live together.

The plan will remain in place until both parties have died or have moved into long-term care.

What’s the Process?

Your adviser will then notify you about what paperwork is required and the process of settling your outstanding loan, plus the interest.

Will I Leave My Family in Debt?

One of the biggest concerns for many people considering an equity release plan is whether or not they’ll leave their family in debt.

If you go into long-term care and need to be provided with assistance, there’s no requirement that your children provide this –

It will come from public funds – so you won’t risk leaving them with any financial problems should anything happen.

In addition, the great news about equity release is that the Equity Release Council2 ensures a ‘no negative equity guarantee3‘.

This means that your family will never owe more than the sale value of your home, even if the amount owed is greater, or property prices have plummeted.

Does My Family Have to Sell My Home to Cover the Debt?

In general, yes!

Equity release is usually paid back through the sale of your home when you die or move into permanent care.

As previously mentioned, in some cases, equity release can be paid off using alternative funds, should they wish to retain ownership of your home.

You can speak to your financial adviser about this.

Equity Release Plans Can Help With Long-Term Care Costs

Whether you’ve got an individual plan or a joint agreement,

If someone goes into long-term care, then releasing equity can help them cover some of the costs involved to go to a more upmarket facility.

In addition, you can even use the funds you have released to access at-home care.

Meaning that you won’t be required to go to a care facility.

So, What Happens to Your Equity Release Plan if You Go Into Long-Term Care?

Your equity release plan will come to an end when the last homeowner goes into long-term care.

However, if you select to have long-term care from the comfort of your home, like a nurse or a family member moving in, then the plan will continue.

Be sure to ask your financial adviser about the terms of your plan, regarding whether you can have others live with you.

However, if you move to a care facility or residence, then your plan will come to an end.

Common Questions

In Conclusion

Equity release is fantastic in that it allows you to live a stress-free retirement before moving into permanent care.

As long as you’re aware of how equity release can impact your means-tested benefits, you can unlock cash with confidence.

Finally, make sure that you get all the right equity release advice before considering taking out a plan.

It’s important to fully understand what’s equity release, to see if it’s right for you!

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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.

rachel w

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
John Lawson

Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
kath icon

Katherine Read
Consumer Affairs Writer

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.

Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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