Going in to care is not usually something any of us look forward to as we grow old. Unfortunately, for some a care home is the only option but sorting out funding for care can be daunting. And with standard care bills in the UK sitting at around £29,000 a year on average, it’s easy to see why. To pay, many people assume that the only option is to sell their home, but this doesn’t always have to be the case.
Here, we’d like to explore the pros and cons of selling your house, whether it’s right for you and what other options may be available:
Pros of Selling
A lump sum of money – When selling your house, it may be that you have a fairly decent amount of equity available. This can be useful for the ongoing care costs, alleviating the need to worry where funding is coming from.
Less worry – By selling your home, it takes away the stress of maintenance and bill payments. With that said, there will be the ongoing costs of care but this will hopefully be covered by the sale.
Cons of Selling
Initial uncertainly – When selling your home, it’s unreasonable to gauge just how long it’s likely to take. If a quick sale is needed, the probability of selling your house for less than it’s worth is greater.
No inheritance for family – Dying isn’t something anyone one wants to think about. When we pass away, the usual protocol is for our immediate family to inherit our estate. If your plan was to leave a substantial nest egg for your loved ones, selling your house could mean losing your biggest asset.
Negative affect on your finances – Having a large sum of money can affect any benefits you receive. Your entitlements could be reduced due to the maximum amount of savings allowed.
We want you to make a fully informed decision, so it’s important for us to share some alternatives.
Alternatives to Selling Your Home to Pay for Care
Renting out your house could be a great way to give yourself a regular income. But, this would need some level of input to make sure the house is maintained. If renting out is an option and your savings don’t exceed £26,250, you can now apply for a deferred payment agreement with your local council. This scheme was introduced in 2015 under the Care Act 2014 and allows you to enter residential care without selling your home. The government will fund your care then recover the costs after your death from your estate.
Opting for domiciliary care rather than residential could also work for you. This means that you remain the owner of your home and carers come to you. This option can be financed in a similar way. Rather than a deferred payment agreement, either a Lifetime Mortgage or Home Reversion could be obtained. A Lifetime Mortgage allows you to release money from your home either as a lump sum or as smaller draw down payments. This is then paid back in a similar way to the deferred payment scheme. A Home Reversion on the other hand, is where you sell a portion of your home (say 50%), you will then receive a lump sum for the agreed amount. The remaining equity is then split when the house is sold.
If you would prefer to stay in complete control of your home but still require a sum of money, downsizing may be better. Though downsizing can be stressful, it does allow you to continue leading an independent life. It would also mean that no payback is needed.
The best route for you will always be dependent on your personal preferences and requirements. Always be sure to seek legal advice regarding your options and don’t be pressured into a situation that isn’t right for you.
Image source: Cristian Newman for Unsplash