Using your home to fund your care
If you do not qualify for all of the financial support you’d like, you may need to consider using the capital tied up in your home to help meet your care costs.
As this is a major decision, and because accessing money in this way can take time, it’s well worth considering all your options in advance and seeking specialist advice from an experienced and qualified care fees adviser
. It might also be sensible to discuss your options with family members, especially if they are likely to be affected by any changes you make.
Making the right, long-term choice is much easier if you are not under pressure to make decisions in a hurry. So here are some of the ways you can use your home to fund your care – complete with their potential ‘upsides’ and ‘downsides’.
Selling the property
If you are going into a care home, and no one else is living in your house, you could put your property up for sale and use the proceeds to fund your care.
This approach will give you the benefit of releasing a large sum of money which you can then use to meet your future needs. Expert advice is recommended to make sure that the proceeds will last long enough to cover the care fees for the rest of your life, otherwise you may be forced to move to another home of the Local Authority’s choosing.
Selling a house or other property can be a lengthy process. Your Local Authority may be prepared to cover your costs under a 'deferred payment agreement' until the sale is complete.
Having a large amount of money in savings, rather than tied up in your home, can also affect any means tested benefits you might currently be receiving.
Deferred payment agreement
Under the Care Act 2014
, Local Authorities now have to offer a ‘deferred payment agreement’, whereby they agree to fund your future care fees and then recover the costs after your death usually from the proceeds of your house sale. This is an option that can normally be negotiated if the person’s main asset is their home, and all the other assets are less than the upper capital limit (currently between £23,250 and £26,250, depending upon where in the UK you live), or their income will not cover their fees.
This option does allow you to rent out the property in the meantime and raise an ongoing income.
Letting your home
Letting the property and using all or part of the rental income to fund care can be advantageous if the family is keen to retain it, or if a quick sale would make it difficult to realise the full value of the house.
Renting out your home does bring its own set of challenges, and it can prove time consuming, so you may well wish to consider using a professional agent to manage this process for you. If so, it is advisable to use one registered with ARLA
(the Association of Residential Letting Agents) to provide additional consumer protection. A good agent will also know the right rental level to set, advise on what modifications will be needed to your home, vet tenants, manage payments and organise ongoing repairs etc.
You should be prepared for ‘void’ periods when you calculate just how much income you can count on, as well as allow for ongoing costs such as redecorating, replacements and repairs.
Equity release products
There are two types of equity release products currently available: Home Reversion and Lifetime Mortgages. Both allow you to stay in your home, while retaining some or all of the ownership, as well as release money from the property (either as a lump sum or a series of smaller payments).
The money released can then be used to pay for care, or anything else that you may need it for. These products may be more appropriate if you require care at home (domiciliary care).
While equity release may offer a handy solution for many people it is not for everyone, and expert, independent advice
is essential before going down this route. It is also advisable to have a product which is ‘Equity Release Council approved’. More information on this is available from the Equity Release Council.
Should you need care in your home rather than residential care, you could consider downsizing in order to raise a lump sum for future care needs. Indeed, there are now many dedicated ‘extra care’ residential developments where help is readily available when needed, and provided in a secure and supportive setting.
Equally, if you are going into residential care, you could downsize your property to release funds, and retain that second property to rent out in order to raise income now and to be able to leave a legacy for loved ones.
Do bear in mind the costs of moving, the on-going investment needed to maintain the property, possible periods of non-occupancy and the effort of moving between properties. Using a reliable agent to let your property will relieve you or your family of some of the burden. Expert, specialist advice
is essential for a decision like this, particularly in regard to deciding what to do with your money, or if there is a risk that funds will run out while care costs still need to be met.
Which is the best route for you?
This will depend upon your circumstances and personal preferences, but it cannot be stressed too strongly that you should explore all your options thoroughly with the assistance of an expert, specialist adviser – and not be hurried into a decision. Planning ahead, whenever possible, is usually the best way forward.
Taking out a Care Plan (also known as an immediate needs annuity) using the proceeds of a property sale, downsizing or equity release) could well play a very helpful role in providing a degree of certainty in assessing and planning for future costs.
It is possible to use other assets to fund your care, read more about this here
People who can help
You may already have a trusted family solicitor and accountant, but we would recommend that you also seek the advice of a specialist care fees adviser who specialises in later life planning. Click here to find a specialist care fees adviser close to you.
If you need a solicitor, Solicitors for the Elderly, is an independent, national network which provides specialist legal advice for older and vulnerable people, their families and carers.