It is becoming a fact of life that many of us will have to pay for care at some point in older age.
The number of adults aged 85 years and older requiring constant care is expected to almost double to 446,000 in England over the next 20 years, according to a 2018 report from Newcastle University’s Institute for Ageing. The number of over-65s needing 24-hour care is expected to rise by more than a third, to one million, in 2035 according to the study.
How much does care cost?
Whether we want care in our own home or to move into care, it comes at a significant cost.
Care fees vary depending on where you live and the provider that you use. As a rough guide, according to Age UK, costs average around £600 a week for a place in a care home and over £800 a week in a nursing home.
According to a 2017 report from Money Advice Service, a care worker at home will cost around £15 an hour. So for a 14-hour week that’s £11,000 a year. Expect £30,000 + a year for full time support and £150,000 + a year for around the clock care.
How to fund home care?
One option is to release the equity in your home using a Lifetime Mortgage. This allows you to borrow money against the value of your house.
If you are eligible for equity release, you could use this method to meet your care costs, but only if you want care in your own home. You could also make home improvements or modifications to suit your care needs as you continue living in your home.
If you fund your care in this way, the money you borrow is only repaid when your property is sold after you pass away, or move out permanently (into a care home or nursing home).
An equity release specialist can help you to decide if this is a suitable solution for you or if you should consider other options.
Long Term Care for someone with a Lifetime Mortgage
If you have a Lifetime Mortgage for other reasons and further down the line you are required to move into long term care, the debt is repaid from the sale of your home when you move out and into care.
It is important to understand that you cannot access equity in your home in order to avoid having to pay care home fees in later life.
What is “Deprivation of Assets”?
The local authority means test is used to assess how much of the care cost you must pay and if you are eligible for any support. If your assets are valued over £23,500, you will likely have to pay your fees.
However, the local authority can make you pay for care if they feel that you have tried to avoid paying for it yourself by taking money out of the value of your home.
It is really important to show that you accessed funds for legitimate reasons.
Removing funds to avoid care home fees is called “deprivation of assets” and it can mean the council assesses you as liable for your care fees whether you’ve spent the money or given it away.
Anyone taking out an equity release mortgage should keep documentation showing why they decided to do it, so they can show the local authority that it was for a legitimate reason.
It is important to discuss the options with financial experts and your family, as this will have an impact on your estate and what you may want to leave to children and grandchildren. It is a very complex area and you do need to seek advice.
Have you checked how much equity you may be able to release? Use our equity release calculator.
Or contact us for an appointment with an adviser to assess your circumstances and discuss your options.
Access Equity Release is a trading name of Your Mortgage Decisions Ltd, which is authorised and regulated by the Financial Conduct Authority, FRN 459763.