Later Life Care: Stay at Home

Everyone has concerns about how they will pay for their long-term care. Equally concerning is the thought of life-savings being drained and your family home being sold to pay for care.

downsize when you get older
In this guide, we look at some of the options for paying for care that don’t require you to sell your home but which use the equity you have built up in the property. We also address some of the other concerns people have about paying for later-life care.

First though, you have to decide what sort of care you want and need, and how you want to live the last few years of your life.

Would you be happy to move into a care or nursing home? Or would you rather have care at home from a professional live-in carer or from a visiting carer for a few hours a day? We know from independent research that care at home is safer, makes you happier and is better value than residential care so you certainly want to avoid having to sell your home if you want to be cared for at home.

Will I Be Forced to Sell My Home to Pay for My Care?

The simple answer to this is no – you cannot be forced to sell your home to pay for care.

But many people will have to contribute to the cost of their care in later life or even meet the full cost. The cost of care is rising partly because, as a nation, we are living longer. In 1960, the life expectancy in the UK was 71 years. By 2018, this had risen to 81 years.

Many older people enjoy fantastic health well into their 80s and 90s but equally some people need help much earlier. Help with shopping, preparing meals, cleaning and personal care or more complex medical care.

Dementia alone affects over 900,000 people in the UK, the vast majority of whom are over the age of 65. Of course, this isn’t the only illness to affect older people, but it gives an insight into the growing need for care that we all face. Part of this pressure is the increasing cost of care of all types. According to figures from the NHS £19.7 billion a year is spent on social care in the UK.

Lifetime Mortgages

Paying for Care in Your Own Home

Who pays for care?

Whether you will have to pay towards the cost of care is something that is decided by a means-tested assessment.

How much you have to pay depends on the level of savings and income you have, whether you own your home and its value. Many people who own their own home assume they will have to sell it to pay for care in old age but there are other options such as a lifetime mortgage.

paying for care at home
State funding

In most cases, the local authority in the area that you live will be responsible for paying for your care if you are unable to. This includes a range of options such as a carer coming to your home, residential or nursing care homes. If you qualify for state funding ask about live-in care in your own home too – whilst it may be a relatively lesser-known option it can be just as cost-effective as a care home for the local authority.

Private or Self-funding

Currently, if your capital, such as savings, is above £23,250 you are likely to have to pay your care fees in full. And once your savings fall below that threshold the value of your home will be included in the means-tested assessment under certain conditions as we discuss below.

Will my home be included in the means-tested assessment?

If your home is rented or the care you need is short-term or temporary, your home will not be included in the means-tested assessment.

How much you have to pay depends on the level of savings and income you have, whether you own your home and its value. Many people who own their own home assume they will have to sell it to pay for care in old age but there are other options such as a lifetime mortgage.

There are also other situations in which you own your home but it will not be taken into account, such as:

  • You have care at home.
  • Your partner or spouse still lives with you
  • A relative aged over 60 lives with you
  • A relative who is disabled lives with you
  • A child of yours under the age of 18 lives with you

If your property is part of the means-tested assessment, it won’t be taken into account for the first three months of care fees. This is to give you the chance to decide what to do with the property and there are ways to avoid selling your home as we discuss below.

How to avoid selling your house to pay for care

Many people have a substantial amount of equity in their home that could potentially be used to provide better care and a better lifestyle in later life, but there are a number of different ways to use that equity that don’t involve selling your home so it makes sense to understand them all. Here are the most common ways of releasing money from your home without selling it.
Renting out your home

One option is to rent out your home and use the income to pay for your care fees. This can work if you own your home outright and intend to move into a care home or nursing home. However, unless rents are particularly high in your area the rent is unlikely to cover all of the care home fees. And for those who recognise the clear advantages of having professional live-in care this option is not feasible.

In addition, as a landlord, you would have certain responsibilities to your tenants. While you can assign those responsibilities to a letting agent their services will cost a fee. Nevertheless, it could be one way of not selling your home to pay for a care home or nursing home.

Local Authority deferred payment scheme

The deferred payment scheme is when a local council agrees to pay for your care in full but when your property is sold, they are paid back from the proceeds. It is available from some local authorities if you have savings of less than the £23,250 threshold but have equity in your home. A deferred payment agreement works in a similar way to an equity release scheme or a lifetime mortgage from a commercial provider. It, therefore, makes sense to compare deferred payment and the different types of equity release schemes to see which provides the best deal. It is also worth finding out what the actual care choices are with such a scheme as they may only offer a limited choice of care homes and no option for live-in care.

Lifetime mortgage

The increase in property values in the UK means that anyone who has owned their own home for many years now have a substantial amount of equity. For a homeowner over the age of 55, a lifetime mortgage allows them to use some of the wealth in their home to pay for care. Clearly this option works well for people considering live-in care – they can remain in their own home but use the accumulated equity to fund their care costs. Depending on the value of the property this type of arrangement could still leave a significant inheritance for the family and has the added benefit that the value of the property would probably continue to rise

Broadly speaking, the various lifetime mortgage products work in a similar way. They allow you to release equity tied up in a property without having to make repayments. The current market interest rate for these products is typically around 2% per year. which can now be flexibly serviced year on year, or will be added to the amount borrowed when the property is ultimately sold when, and only when, the capital (and any interest outstanding) is paid back.

The repayment of this debt then reduces the value of the estate and thus the amount of inheritance tax due.

Whatever way you choose to pay for your care it is essential to get independent financial advice from a specialist in the funding of long-term care. Paying for care is an important financial decision so you need to fully understand the options and the risks. Interest rates and fees vary on lifetime mortgages so you need to find the most suitable product for you.

Some questions about paying for care in later life

Can my daughter continue to live in my house if I go into care?

For many older people, the thought of selling their home is a painful one. If your son, daughter or other relative lives with you, they are over the age of 60 and your home is their permanent residence, then the property is not included in the means test assessment and they can continue to live in the house. The same is true if your own children live in the property and are under the age of 18.

Do I have to sell my house to pay for care?

No, there are other options such as a lifetime mortgage, which will use the wealth you have accumulated in your home to pay for your care, and only needs to be paid back once the house is sold. This can be a good solution especially for those who want to have live-in care at home. According to the latest estimates from the business intelligence provider LaingBuisson there are 966,000 people in the UK receiving care in their own home of which about 10,000 (9%) receive live-in care.

Lifetime mortgages are regulated by the Financial Conduct Authority and further protection and guarantees are available through the Equity Release Council so that, for instance, you will remain the legal owner of your home or you can ring-fence a portion of the equity to leave as an inheritance.

Is selling my parents’ house to pay for care a good idea?

Any major decision concerned with paying for care should only be done after talking to an independent financial adviser who specialises in financing later-life care. SOLLA – the Society of Later Life Advisers – is a not-for-profit organisation that can help people find trusted, accredited financial advisers who understand financial needs in later life. There are also other qualified independent financial advisors available.

It’s also worth considering that if you sell your parents’ home then you are eliminating the option of live-in care for them, which has been shown to result in better mental and physical health in older people. See our latest Better at Home Report to find out why this is a life-enhancing form of care.

Can I sell my home or gift it to my children to avoid care fees?

You can sell your home but there are stringent rules about claiming money to pay for your care. In most cases, if you gift or sell your home then apply for help with care fees, there needs to be a gap of 8 years between selling your property and the funding of your care.

Aside from this, it will limit your care choices and live-in care in your own home where the surroundings are familiar and life can continue as normally as possible, will no longer be an option for you. Gifting your home to relatives will also incur other charges and fees, including tax. As with any decision around paying for later-life care, it is important to consult with an independent financial adviser.

Preparing for the future

No one likes to think of getting old, infirm or seriously ill but it is prudent to think through your future care options. If you own your home, you may not be keen to sell it to pay for your care. As we’ve discussed in this short guide there are less well known but proven options to enable you to be cared for and still live in your own home as normally as possible. A lifetime mortgage from one of the wide range of major insurance companies is an increasingly popular choice, which also carries the increased likelihood of ultimately being able to leave an inheritance for your children.