Equity Release affects on care fees

[Mittens67]

Not actually my parents but close enough friends I try to help.
Both in their mid seventies. Husband has a raft of physical health problems and very early dementia. Wife had a heart attack ten years ago but is generally fit and well.
They own their bungalow which is falling apart around them but they don’t have the cash to repair it which they would love to do.
I have suggested equity release but they are concerned that this will be a problem if one of them needs to pay for care in the future.
To my knowledge this would only be any sort of issue if they took out equity and kept the cash in the bank but in their situation any money would be spent immediately on much needed repairs and updating their home.
As far as I know the terms of modern (reputable) equity release are that one person moving into care would not affect anything but that once the second person had moved out or passed away the property must be sold to repay the lender within six months.
They don’t receive any means tested benefits and are not entitled to any.
I am trying to get attendance allowance for the husband but it is very hard trying to convince either of them to try anything at all tbh.
Any advice please?

Never do equity release is the only thing I have to say. It is a disaster waiting to happen.

Equity release is a lot different than it was years ago.
Modern regulation means there is never a surplus to repay so if you have no dependents to provide for what is the problem?
Surely it is better that people in this position can use their only asset whilst they are still living?

This +++++!!!

If you read my reply to the pp can you explain your reason please? I am fully aware that in decades past equity release led to people losing a lot of money they had thought would be inherited but in this situation that does not apply at all.
No family to leave anything to and there is a cap on the amount the equity release interest can accumulate to which never exceeds the value of the home in question.

This sounds like just the sort of couple for whom equity release would be ideal. Why should they live in a falling down bungalow for the benefit of their heirs?

Martin Lewis advice

which can be summed up as - look to downsize first. But if that's not appropriate, equity release is a possible but expensive way to borrow money. Don't take it out all at once - get enough for immediate needs, then more later. No point in paying high interest on money that's just sitting in the bank. And don't assume that because you're over 55 you won't be able to get a regular mortgage - speak to a broker.

He then goes through the various forms of equity release, and pitfalls to avoid.

Money spend on bringing living conditions up to scratch shouldn't affect later care costs.

Have you considered all/any other options open to them?

Are you proposing equity release to improve the home?

That gives me an odd feeling - I can't explain it!

What family do they have? Have you costed home improvements? Do you know if they have savings already? There are too many other things to consider before immediately suggesting equity release.

I don't care how reputable the equity release claims to be only the company gains in the long run.

I think you should be very careful before you recommend or encourage equity release to an elderly couple who have stated they are concerned about pursuing it. Especially if one is in the early stages of dementia.

But I would encourage you to continue to try and assist them to get the Allowance, if eligible.

I agree with you op it sounds like a great solution for them. The main catch really is it might mean they can’t pay for their own care in a few years which might mean they end up somewhere they don’t chose. However most people don’t go into care so planning on something that might not happen seems daft.

They can’t afford to own their current home: downsizing is the first thing to consider. But it sounds as if they’re resistant to anything you suggest anyway.

Have seen it happen in similar situations where one partner was left behind but couldn't afford to leave the property to downsize because the interest and fees had eaten away so much at the equity that there wasn't enough to sell up and afford to rebuy a smaller, cheaper, more manageable, more energy efficient property elsewhere. Personally that's what I would suggest. Downsize and release cash but remain in control of their own property and finances.

It was a disaster for the widower I knew.

If the husband is in poor health and has dementia major house renovations sounds like the last thing they should be considering. Especially if finances are tight. It's stressful even for people who are well. My experience was the work cost a lot more than expected, what would they do if they ran out of money after the equity release?

@Spirallingdownwards in this situation there is no likelihood that either person will ever move except into residential care if needed. It is a small bungalow and all their support network are extremely close by.

@Myotherusernameisshy there is no desire to downsize as it is a small bungalow so suited to their needs.
They are perfectly able and wanting to have the work done to their home and obviously costs will be determined.
My question was about the potential affect on care fees but everyone appears to have gone rather off piste in replies.
I appreciate this is well meant but it is not helpful to my actual query.

The biggest negative will be they end up in social care with no choice as to which residential home because there is no money for them to make an actual choice as the equity release charge will be the first charge and over the whole of the proceeds of sale of the property. In effect there is no home against which to raise private care fees.

I know someone for who this has worked very well. (and quietly wondering about the same myself)
The house would not sell, no relatives/ inheritance issues to consider.
Equity release has enabled rapid works - central heating installation, kitchen, bathroom, gardening - and a regular cleaner. The person appears like a weight has been lifted, a whole change of demeanour…

If only one of them goes into care then it doesn't matter as the value of the house is disregarded if a family member over the age of 60 is still living in the house.

If they both go into care then that is when the value of the home will come in.

With care home fees the council would need to be able to prove that they deliberately gave away their assets for the main reason of avoiding care home fees.

Intention is the most important factor that they will consider.

If they knew that they were both about to go into care in the near future and took out a huge mortgage and then gave away the money to their children, that would probably be looked on as deprivation of assets.

That is not what is being suggested here though. The mortgage is necessary to maintain the property to a reasonable standard and/or adapt it to make the house more suitable for them as they get older.

This is not in any way deprivation of assets.

Although I would echo pps who said to get the minimum mortgage to cover their needs and they may also wish to think about paying the interest monthly (this is an option with lifetime mortgages) if they are in a position to do so without impacting their lifestyle.

I they release equity and have it sitting as cash it will be taken into account whereas the house value won't while 1 still lives there. But if it's been spent on repairs it doesn't exist anymore to impact. Neither major works nor moving are ideal with dementia but I would aim for repairs rather than any fundamental changes to minimise the impact. When you say it's falling down I assume you are thinking repair/replacement of windows, fix roof leaks/ replace guttering etc rather than any remodelling. Any kitchen /bathroom works I'd try and do as close as like for like as possible, even down to colour.

"I am trying to get attendance allowance for the husband but it is very hard trying to convince either of them to try anything at all tbh."

I had this same issue with my parents, except it was the other way round. He had been my mother's carer for a long time. It took years to convince them to apply for attendance allowance.

In the end I got the form and said, look, do you want another £300 a month? I filled it in (there are some personal questions on the form that my mum wouldn't have wanted to speak about so I didn't ask those as I was aware of the answers already). Got my mum to sign it and sent it off myself.

It sounds pretty much as I had thought and I will try reassuring them again.
Obviously an independent financial advisor would have to be involved if they did decide to go ahead.
It frustrates me to see them struggling needlessly and to have a decent kitchen and bathroom and working doors and windows for a start would make life much easier.
I think there is very much a generational fear of anything financial including applying for benefits and the full basis of social care financial assessments is not easily understood before you actually have to apply.