Equity Release – How can it Help me to Finance Care at Home?
For many in retirement, the question of paying for care is one of some consideration and often the biggest asset held is the home. Often, however, this isn’t a readily available source of funds. Most don’t want to sell the home to provide funds for care and the elderly individuals concerned are often keen to stay in familiar surroundings where they are most comfortable.
One option to help finance care but that is often misunderstood is the area of equity release. Equity Release is an area of personal financial planning that has developed significantly in recent years. It is now a highly regulated sector of the financial market that is governed by the Financial Conduct Authority with advice provided by qualified specialist financial advisers, a far cry from some of the schemes that were around in the 1990’s. There is also an industry body, the Equity Release Council that sets minimum standards for those selling and providing approved plans to ensure the products are clearly communicated, are ethical and the scheme chosen is in the individual’s best interests.
How Does It Work?
The schemes enable those in retirement to release funds from their home. The amount you can release is related specifically to age, so the older you are the more you can release, and there is effectively no age limit. The funds that can be released is linked to the value of the home so the more the home is worth, the more that can be released.
Schemes run for the lifetime of the applicant(s) and only needs to be repaid when the home is permanently vacated or on the eventual passing of the individual. You cannot have negative equity or owe more than the home is worth and importantly any equity in the home belongs to the individual or their family on eventual sale. Individuals can also move home and downsize as needs dictate over time.
Interest is charged on funds taken and so it makes sense to only take the funds as they are needed to keep costs low. Interest can either be paid monthly, or if funds don’t allow part or all of the interest can be rolled up and added to the funds borrowed.
How Can I Get The Funds?
Funds can be drawn down as a small or large lump sum or, as is more popular, on what is called a drawdown basis where money can be taken as needed from the equity in the home up to a defined maximum on a monthly or less frequent basis over the individual’s lifetime.
What Can The Funds Be Used For?
Funds can be used for pretty much any reason needed by the individual. Typical reasons are:
- To pay for care at home so that the family retains the home and the individual can stay in familiar and pleasant surroundings where they are most comfortable. Funds can be taken as needed over a period of time to help supplement income or to help pay for the cost of care as needed.
- Paying for home improvements – new windows, a wet room, stair lift, home repairs, new furnishings etc.
- Supplementing pension income to improve their standard of living. Even £3,000 a year could provide an extra £250 of spending money a month.
- To repay an outstanding mortgage or debts where the current bank wants their money back and this enables the individual to raise funds so they can stay in their home.
If you would like more information we would recommend you seek professional advice. Comfort Keepers have partnered with award winning Financial Advisers and Equity Release specialist Emerald Finance who are offering all Comfort Keepers’ clients and families a free initial consultation. Should you wish to discuss this further and see what options are available to you, they can be contacted on 01903 222940 or at www.emeraldfinance.co.uk.
Emerald Finance is a trading name of Fairstone Financial Management Ltd who is authorised and regulated by the Financial Conduct Authority – FRN: 475973