How releasing equity is helping over 55s with home care costs

A home is supposed to be a place of sanctuary and comfort in retirement. However, as the cost-of-living crisis intensifies, many more homeowners over 55 are considering dipping into the value stored in their homes to boost their squeezed incomes and improve their bank balances to help create a safety net. This was the case for one of our clients, a 72-year-old women, who was struggling to pay soaring fuel costs and faced the prospect of not being able to heat her home.

Care-seekers often state that they are concerned about how they are going to meet ongoing care costs for a family member. It’s not uncommon for care providers to have annual fee increases in line with inflation — making current economic challenges a particular concern for those who are required to privately fund their care.

As it stands today, inflation sits at around 10% — so, if the cost of care was £1,000 a week, you can expect a price rise of around £100 a week (or – an additional £5,200 a year if the current market rates are sustained.)

Care providers are exposed to the same inflationary pressures as other businesses and households across the country; with soaring energy prices and increased staff costs, care services are having to pass on some of these costs in the prices they charge to provide support.

The UK’s cost of living crisis has created a level of economic hardship unseen in the country for decades, with many over 55s looking for alternative sources of finance to help them manage care costs, allowing them to remain in the homes they cherish if they choose to do so.

Using a later life lending scheme to fund home care costs

There is no getting around it – care costs are expensive! The amount you’ll need to contribute will depend on your elderly relatives’ circumstances and savings.

Some families have had to sell their parents’ homes to pay for care costs and sadly this is a reality for many. However, using Equity Release to fund home care costs is another route to consider, as this is a way of freeing up any capital that people may have in their property without losing their home.

For many over 55’s, the desire to continue living in their own homes during old age could make this a much more desirable option. Carefully planned Equity Release can be a solution for elderly people who do not wish to sell their homes to meet expensive care costs.

Equity Release allows homeowners over 55 to access some of the cash tied up in their house, with a loan that doesn’t need to be repaid until they die or go into long-term care.

Releasing equity to stay in your home in later life

By working with a trusted Equity Release adviser, homeowners over 55 have increasingly been able to use the value of their property to fund home care fees. The regulations involved with Equity Release mean you can never be evicted from your home, enabling you to stay there for as long as you’re able to continue living independently.

There are lots of different Equity Release products available, so talking with a later life lending specialist can help to uncover whether releasing equity might be right for you, as well as the different schemes available, ways to minimise interest, and how you want to access the money (either in instalments or in one lump sum).

As independent Equity Release specialists, we operate to the highest standards and will always explore other financial options available first before proceeding with an equity release plan. We will only arrange a mortgage if we are completely happy that it meets your best interests. If it’s not suitable for you, we will say so.

Equity Release options for home care funding

There are several different ways in which Equity Release can be structured to meet the costs of care. The most common Equity Release deals are mortgage-based products that are loans secured against your home. Typically, there are no monthly repayments – the loan, including the built-up interest, is repaid from the sale of the property when you die or go into long-term care. These are known as Lifetime Mortgages.

Lifetime Mortgage Drawdown Plan

One way of using Equity Release to meet care costs is by drawing down regular sums from a Lifetime Mortgage Drawdown plan. This can allow you to pay regular care fees as they arise, as well as have money available for other household costs.

Lifetime Mortgage Drawdown Plans let you draw down cash from your home as and when you need it, rather than in a lump sum. This can be an advantage in terms of interest repayment, as interest is only charged on the money as you receive it. If you released a large initial lump sum, interest would be charged on the whole amount from the start.

Only drawing down funds as-and-when they are needed can also help to manage the amount that has to be contributed based on the means test.

One-off lump sum

Some people use Equity Release to take out a one-off tax-free lump sum. This may be used to manage care costs, pay other bills, or fund large home improvement work.

This Equity Release option would be appropriate for someone who needs money immediately for up-front costs such as home improvements or adaptations.