How to pay for care costs with out selling your home
Care can be a substantial cost for the elderly and their families.
Many people who own a property worry that they’ll have to sell their home in order to pay for their care, whether that be residential care that requires them to move, or to pay for a nurse or care worker to assist them in their home.
Some homeowners resort to selling their home or have family members that are willing to sell their own property to fund care costs.
This isn’t an option for everyone, but the good news is that there are other ways to fund your care - this blog post discusses the following topics...
- Do you have to pay for your own care?
- Are you entitled to funding for your care?
- How will the council calculate the value of your property?
- How to avoid selling your house to pay for care
- What are the types of care available?
- Where can you go for advice?
Do you have to pay for your own care?
Not necessarily. If your local council is arranging your care for you, they will look at your financial situation, including savings, property, investments, pensions and any benefits you’re eligible for to calculate how much you should pay towards the cost of your care.
Are you entitled to funding for your care?
- If your capital and income is above £23,250 you will more than likely have to have to pay for your own care fees (also known as self funded care)
- If your capital and income is under £23,250 you might get some help from your local authority, however you may still have to pay some fees
- If your income and equity is below £14,250, then the council will not consider when means testing your finances and will therefore most likely pay for your care
Will all of your benefits be included to means test your finances?
Some benefits including the mobility component of Disability Living Allowance or Personal Independence Payment, may not be included when calculating your affordability for care costs.
How will the council calculate the value of your property?
If you are unable to arrange an independent valuation of your home, the council that arranges your care will appoint one to calculate its current market value.
If you still have an outstanding loan or mortgage on your property, this will be deducted from the overall valuation when it comes to means testing your financial ability to pay for your care.
10% is also deducted from the property value to take into consideration of any fees or expenses that may be payable from the sale of your home.
For example, your property is valued at £100,000 and you have an outstanding mortgage debt of £40,000. £10,000 (10% of the property value) is also deducted. This leaves a figure of £50,000 for the council to include in your financial means test.
How to avoid selling your house to pay for care
Many homeowners are unaware that the value of their home won’t be taken into account in the means test if it is still occupied by:
- Your partner or former partner
- Your estranged or divorced partner IF they are also a lone parent
- A relative who is aged 60 or over
- A child of yours aged under 18
- A relative who is disabled
- OR you're arranging care and support at home
Another scenario where your home wouldn’t be considered in a means test to pay for your care is if the care you require is only short- term or temporary.
Gift your home to a loved one
To avoid your home being sold to pay for your care costs, you might be interested to know that some homeowners gift their property away to so that it won’t be counted in the means test.
This would mean that you would be giving the ownership as well as all of the equity you own in the property to someone else and would no longer have any legal right over the property.
Many elderly people plan to leave their family members inheritance but the cost of care can prevent them from being able to do this. By giving their home away, this allows them to pass on money.
The downside to giving your home away to a loved one, especially if you do it whilst in the process of looking for care, is that it may be seen as a deliberate deprivation of assets. This could result in you still having to pay the same amount of money for care as if you still owned your home.
Defer your payments for care
It may be possible for you to delay paying the costs of your care until a later date, for example until after you pass away. The cost of your care would then be paid from the sale of your property.
A temporary delay could also be to given to allow you time to sell your home and your local council are obliged to tell you this and to check whether you are eligible.
Equity Release is a type of loan that is secured against your property.
Rather than sell your home to pay for the cost of care, you could borrow the money and secure the loan against your property.
The amount that you can borrow will depend on a number of factors, including how much equity you own in your property.
There are two types of Equity Release which are:
- Lifetime mortgages
- Home reversion plans
You would still remain the owner of the property and the loan is paid back from the sale of your home when you die or move into residential care.
Interest Only Lifetime mortgage
An Interest Only Lifetime mortgage is a type of loan that is secured against your home that allows you to release equity from your property.
Like a standard interest only mortgage, you would be expected to pay the interest of the loan on a monthly basis, which ensures that the balance of the loan remains level.
This could be paid using savings, benefits or any other form of income you may have.
Your lender would look at your finances to decide whether or not this is an affordable option for you before approving this type of loan.
The remaining balance is paid back when you die or move into long-term care from the sale of your property.
If there is any money left over after paying your loan, this would be inherited by your beneficiaries.
Things you should know before getting an Interest Only Lifetime mortgage or Equity Release
There are eligibility checks and criteria that your mortgage lender will require you to pass before you can apply for an Interest Only Lifetime mortgage.
As well as this there are also factors that can affect how much you can borrow against your property.
- Your health - this can affect the amount you can borrow
- Your age - you must be aged 55 or over
- Your income - this could be from a job, pensions or savings
- The property value - it should be worth a minimum of £70,000
- The type of property you live in - lenders prefer standard construction properties
- Where your property is - it must be in the UK
- Your credit history - this could affect how lenders judge your ability to repay your interest payments
What are the types of care available?
Finding the right care can be overwhelming, especially if you’ have never had to consider this as an option either for yourself or a loved one.
There are many different type of care and so the cost can depend on the level of assistance you may need.
For example, health conditions including alzheimer's, physical disability or terminal conditions may require round the clock care.
The main types of care available in the UK as follows...
This type of care offers services for those with specialised nursing needs such as long term illness or complex physical needs.
Qualified nursing staff would be on hand 24-hours a day to provide medical care and other forms of specialised support.
Short stay care
This might be needed if you’re recovering from illnesses or an operation and are unable to stay at home on your own.
Often short stay care provides a short respite for elderly people whilst they recover.
If you or a loved one has Dementia, specialist care may be required to support the complex needs that should be met.
This would involve a highly trained nurse or member of staff providing individual care in a safe environment.
Maintaining a property and day to day chores can become very difficult for many elderly people.
Residential care is an option that would allow you to keep your independence with the peace of mind of assistance with everyday tasks such as cleaning, getting dressed or bathing.
A residential care home is visited by nurses and GPs regularly meaning medical care can be provided when needed.
At home care
A lot of people don’t require full time care and there are also others that wish to stay in their property.
At home care is would involve a nurse or trained professional to visit your home.
This could be a suitable option for you if you need:
- Housekeeping or domestic work
- Someone to cook or prepare meals
- Assistance with healthcare including medication or physiotherapy
- Help with getting washed and dressed
Depending on where in the UK you live, at home care is usually around £20 an hour.
Where can you go for advice?
If you are worried about the cost of your care or perhaps a loved one’s care, it can be helpful to talk to someone who has experience in navigating through the process of funding and organising care.
Age UK provide many services to help elderly people and have advisors across the UK to listen and provide accurate information based on your situation.
You can find your local Age UK representative here.
As well as this, here at OMA, we are able to provide free, confidential and professional advice about the options that may be available to you. Call Online Mortgage Advisor on 0800 304 7880 or make an enquiry here.
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