Equity Release / Long Term Care
Equity Release is a generic term and may include Lifetime Mortgages or Home Reversion Schemes. Below is a description of these plans together with other options.
Equity Release is being increasingly used for a multitude of purposes and is normally available for individuals, or couples, who are over 60 and with a property value in excess of £70000.
Typical uses include:
- Consolidating loans in order to reduce outgoings.
- Boost income, especially with unprecedented low interest rates.
- Home improvements.
- Help your family.
Care has to be taken as any State benefits or Grants could be affected.
Equity Release
A loan is taken out using your home as security therefore you continue to own the property. There are no monthly payments, with interest rolling up until the mortgage is eventually repaid. This would normally be either when you die, move into residential or nursing care and when the property is sold. There can be penalties for early repayment for any other reason.
The amount of mortgage will depend upon the age of the borrower, or youngest if joint. Typically this would be 20% for a 60 year old and higher for older ages. Health issues can also help to improve the amount borrowed.
The advance can be made as a single lump sum or as a regular income.
Home Reversion
With home reversion, you exchange the ownership of all or part of your property for a lump sum. You continue to live there as a tenant paying a nominal rent only, but you remain responsible for the maintenance. The home is sold when you die or move into care as per equity release.
The amount received is higher than for equity release, however, you will normally be paid less than the market value. This will depend upon your age at outset.
Other options
The above schemes may not always be suitable therefore other options must always be considered.
- Selling your current home and buying a smaller property.
- Claiming any State benefits to which you may be entitled.
- Using savings or selling investments.
Other avenues must be considered in order to establish that the advice is appropriate to your needs.
This will include: interest only borrowing, debt consolidation, investment income.
Legal advice is always recommended. There are costs involved which will be quoted in full in the individual illustration and Key Features Document.
Long-term care
Many people in Britain are aware that they will have to fend for themselves in retirement, including the provision of any long term care requirements. However, it’s usually not until the time care is actually needed that the reality of the costs hit home.
There is a common theme to long term care – it’s unpredictable, expensive and can be very stressful. However, a lot of the problems can be avoided. With careful planning, professional advice and the appropriate financial policies it is possible to bring certainty to the provision of care, particularly where finances are concerned.
Frequently asked questions
If one of your relatives has to go into a residential or nursing home, how will they/you fund these costs?
What is the role of the Local Authority?
What might happen to my family home? Can I give it away?
What assets are taken into consideration?
Contact us to go through the range of options that are available to you and any benefits available via the state benefits.
We also run a series of seminars on this subject alongside Estate planning. Please contact us as to next available date.
Advice on Long Term Care should only be given by qualified advisers.