Equity release to pay for care - your essential guide

Planning how to pay for care as you get older can be a daunting prospect. After buying your home, it's likely to be one of the biggest financial decisions you’ll make. With equity release, you can access funds and stay living in your home. The money you release can be used to pay for care or for any purpose you like.

Residential care or professional care at home can cost a lot, so it’s important to speak to an equity release specialist such as Age Partnership and consider all the options available to you before committing. In this guide, we focus on using equity release to pay for care and outline the alternatives.

Calculate how much cash you could unlock with equity release

Use our quick and easy equity release calculator to see how much money you could release from your home.

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Why use equity release to pay for care?

If you have paid off (or nearly paid off) your mortgage and are aged 55 or over, equity release may be a good idea , particularly if you don’t want to move home or aren’t up to doing so. You could use an equity release scheme to unlock some of the value of your home as tax-free cash to put towards your care needs. For example, to adapt your home so you can get around more easily, fund care in your own home or buy an immediate need annuity so you have a regular income to pay for your care.

Types of equity release to pay for care

There are two main equity release plans to consider, each with their own pros and cons to weigh up.

1. Lifetime mortgage:

A lifetime mortgage is a loan secured on your home, which is usually repaid by selling your home when you die or you move into long-term care. To qualify for a lifetime mortgage, you need to be a UK homeowner aged 55 or older with a property worth at least £70,000.

If you’re considering using a lifetime mortgage to pay for your care, you could release a large, single payment or smaller amounts as and when you need them. When the loan is paid off, any funds left over will be paid to your family or other beneficiaries.

Read our guide to lifetime mortgages.

2. Home reversion plan

A home reversion plan enables you to sell all or part of your home for significantly less than its market value, in return for an immediate lump sum, a regular income or a combination of both. You can stay living in your home as a tenant, but without paying any rent. When your house is sold, the plan provider will be repaid out of the sale proceeds.

Read more about the types of equity release available to you.

Does equity release reduce care costs?

If you move into residential care, your equity release scheme will usually end and your home will be sold, unless you have released equity in joint names. In this instance, your equity release plan will continue until the joint holder also moves into care or dies, at which point the property will be sold.

Self-funding care - alternatives to equity release

Use any savings and investments

If you have enough savings or investments, this may be a straightforward way to pay for long-term care. It means your family won't inherit all (or possibly any) of your savings, but they should inherit the full value of your home. Like equity release, this route also ensures you can continue living in your home and be cared for there if possible.

However, the value of investments can fall, while care costs might rise, particularly if you start needing 24-hour care, or move into a nursing home.

Downsize to a smaller or cheaper property

Do you use all the rooms in your home? Are you finding it hard to get upstairs? Do you struggle to maintain it? Are you spending too much on heating or Council Tax?

Moving into a smaller property could solve these problems as well as releasing cash to help pay for your care. You could also investigate care costs in various areas, to see whether you could save money by relocating to a different town or county.

Enter into a deferred payment agreement

If you want to use the value of your home to pay for your care, a deferred payment agreement is another option. With this agreement your local authority will pay for your care home costs (usually up to a total of 70 – 80% of your home's value) until you die and your home is sold, or if you decide to sell your home while you're in care. The authority will then claim back the costs from the proceeds of your home.

The agreement usually comes into effect once you've had 12 weeks of care.

Next steps

To see how much equity you could release from your home, use our free and easy to use calculator.

Try the calculator

Or for free advice from equity release specialist Age Partnership, call 0800 368 8466.

Ways to contact us

Call 08001337380
Call 0800 368 8466
Arrange a callback
Arrange a callback
Try the calculator
Try the calculator
Email us
Email us

Frequently asked questions on self-funding care

Why might I have to fund my long-term care?

You may need to self-fund all or some of your care if:

1. Your total assets (including your home if it’s unoccupied), are worth more than your local authority threshold below.

Asset limit for local authority care funding across the UK

REGION

TOTAL ASSETS

England and Northern Ireland

£23,250

Scotland

£28,750

Wales

£50,000

2. You have assets over £14,250 but under the upper threshold which only entitles you to some level of local authority funding.

3. You would like to pay more to enjoy a better standard of care.

4. You need to cover a shortfall in your care fees during a deferred payment agreement period with your local authority.

Does the value of my home make a difference?

If you are being means tested to see whether you are eligible for support, the current market value of your home will be included – unless your partner, a child under 18 or another family member is still living there.

The test deducts any outstanding mortgage or loan debt on your property from its value. Another 10% is then deducted to cover the expense of selling it. 

As a self-funder am I entitled to any help paying for care?

Yes, despite having to fund all or some of your own care, there are various state benefits you might qualify for. Some of these may be means tested, but others are not dependent on your current income or savings:

  • Attendance Allowance - you could be eligible for an Attendance Allowance if you have a disability that means you need someone to help with your care.
  • Pension Credit - if you are old enough to receive a state pension and have to manage on a limited income, you could apply to top it up with Pension Credit.
  • NHS Continuing Healthcare - if you already require regular professional healthcare rather than simply the normal needs involved in getting older, the NHS is responsible for fully funding your care, whether you're in your own home, a hospice, or a nursing or care home. There isn’t an official list of which conditions are eligible, so you should ask your GP or social worker to set up an NHS Continuing Healthcare assessment for you.
  • Council Tax Benefit - if you live on your own and have to move into a care home you don't need to pay council tax as long as your home stays empty. Just let your local council know.

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