Cash From Your Home
Making best use of the value in your house
If your house is of, or close to, average value (£160,380 in England, Wales & Scotland in December 2011 – Land Registry), and you need care costing £600 per week for 3 years (the average length of stay in a care home is 3 years) then your care costs will be less than the value of your home:
£600 x 52 weeks x 3.5 years = £109,200
The sale of your home could fund your care needs. But:
- You may need care for many more than the 3 year average or your care needs may rise: this risk is best covered by insurance.
- You may wish to pass your home on to your children and not wish to sell it.
Can you finance your care without having to sell your home?
The following illustrations show how this may be possible: if your circumstances are similar to those in the illustrations this may be possible and you can discuss these with your Independent Financial Advisor.
Ways in which your home may be able to fund your care without you having to sell it:
Renting out part of your home while continuing to live and receive domiciliary care in it or renting out the whole house while you live in an extra care flat or care home is possible. The table below shows potential costs for renting out part or all of your home for three differently priced homes. Please note that the figures below are only indicative. Actual rental costs will vary not only with property sales values but also with the particular circumstances of local demand.
- Step 1 – My Care My Home advises what net rent you are likely to obtain if you rent your property
- Step 2 – Your Financial Advisor establishes what is the largest loan you can secure on your property if you were to rent it. If the details of your property and net rents were similar to those listed above, the size of the loan which can be repaid in twenty years out of net rental income assuming an interest rate on the loan of 7%, is as shown below:
A £140,000 house could repay a loan of £54,000
A £280,000 house could repay a loan of £107,000
A £420,000 house could repay a loan of £161,000
- Step 3 – Your Financial Advisor establishes the cost of a care fees insurance policy which will meet the costs of your care for the rest of your life.
- Step 4 – If the cost of your care fees insurance policy is less than the loan which can be repaid out of net rental income then your property can be used to finance the cost of your care for the rest of your life without your having to sell it. Moreover after 20 years your children or estate will enjoy the benefit of the house, free of debt, when the loan has been repaid. Note that the examples above do not take account of either inflation in house values or in rents. If there is rent inflation over the loan repayment period then the loan repayment period is likely to be reduced.
- Step 5 – If it suits your estate planning My Care My Home can arrange for your property to be held in Trust by an Exempt charity ( which owns part of My Care My Home) until the loan is repaid – whereupon the property is transferred, debt free, to your children or estate.