One of the greatest concerns for us all in later life is having to leave our well established home and move into a residential care home as our mobility or mental capacity starts to fail. Some elderly people are in a very fortunate position in that they have family or friends living close by who can provide much needed support as informal carers. However the sad fact is that as dependency grows your informal carers may not be able to provide the constant level of care required.
It would usually be at this point that a move to a residential care home may be considered. Many people feel that this is the only option as they have little or no savings to pay for care so they would expect that their property would be sold and the money would then be available to pay for their care.
There is however an alternative. There are various equity release schemes available that can help you to access the funds that are tied up in your home without the need to sell. This could enable you to pay for your care in your own home for as long as possible. This option may not be the answer for everyone but it certainly opens up more choice for the provision of your long term care.
The two main types of equity release scheme are Lifetime Mortgage and Home Reversion Schemes.
A Lifetime Mortgage is a loan that is secured against your property that would normally be paid off from the sale after your death or if you permanently moved out of the property into residential care. The maximum loan available would be based on your age (or youngest age if a joint plan) and the property value. Some schemes exist that will release a higher percentage of the property value based on your medical history. Funds can be released either as a lump sum, which you could purchase a long term care plan, alternatively you could just drawn down funds as and when needed to pay for the care needed.
Some schemes such as interest only lifetime mortgages now allow you to make payments of interest on the loan. This enables the estate to protect the size of the final inheritance and is becoming a popular form of equity release scheme. Nevertheless, the majority of equity release schemes require no repayments on a monthly basis, as the loan plus accrued interest is paid off from the eventual sale of the property.
A Home Reversion Scheme allow you to exchange a share in your home or the entire property for a lump sum payment. In some instances they may be able to release a higher sum than would be available on a Lifetime Mortgage scheme but they are only available to those aged 65 and above were as the Lifetime Mortgage Schemes are available from the age of 55. Due to the heavily discounted price that would be paid on this type of scheme they would only normally be recommended for those in reasonable health.