How it works, how it affects partners & your family
With so many of us living much longer, more and more people today find themselves reaching an age where living at home without support becomes a challenge. At this stage many choose to move into long-term residential care, rather than struggle at home. And, with all the extra help, support and with a greater social network, the right care can provide a new lease of life for many.
Should you or a family member find themselves in this position then it goes without saying that sourcing the right care is your main focus. If, however you have previously released equity from your home you might be concerned or unsure about the effect that this move will have on your plan.
So, it’s worth taking the time now to understand all the ins and outs, when it comes to Equity Release and long-term care, and avoid any unnecessary stress later on.
What’s your plan?
This makes a difference to the effect of long-term care.
If you have a joint Equity Release plan then the agreement has been signed by both you and your partner (both names on the deeds of your home). In this case if just one of you needs to move into long-term care then the plan continues until the other named signatory themselves moves into long-term care or passes away.
All you need to do in this scenario is let us know that one of you is moving into care and will therefore no longer be living at home. And then should the time come for the remaining partner to move into care or when they sadly pass away the agreement will come to an end and the balance will need to be repaid.
If, however, you have an individual equity release plan this means that there is only one signatory on the agreement (the only person named on your property deeds). Most people with an individual plan live alone, however there are times where this would apply to a cohabiting couple. For example, should a couple find each other later in life and one partner moves into the others’ home, from which equity has already been released, this would be the case.
With an individual plan, should the named person move into long-term care the equity release plan comes to an end and the amount borrowed plus any interest will need to be re-paid. This does mean that anybody else living in your home will need to move and in order for the house to be sold.
How it Works
Who is responsible for selling your house?
When the last person, as named on your agreement, moves into long-term care or passes away it is then up to your executors to sell your house in order to repay the balance. They are free to use any Estate Agent of their choice and to set the agreed asking price, just as they would normally.
Does it have to be sold right away?
Of course, they will want to ensure that they receive the best price for the house and be keen to do so as quickly as possible, to avoid accruing interest. Lenders realise however that these things can take time and therefore generally allow 12 months for the sale of your property.
Does the Lender get involved?
Sales typically go through without any involvement from the Lender, however if the amount borrowed is greater than the property price and the ‘No Negative Equity Guarantee’ is required they will need to ensure that the selling price is in-line with market value.
What does the ‘No Negative Equity Guarantee’ mean?
This is a guarantee for all Equity Release Council approved plans and, as all our Advisers are members of the council, these are the only plans we advise on.
With this guarantee you will never be asked to repay more than your home is worth, even if it’s value should drop below the amount you have borrowed. This also means that you don’t need to worry about leaving your family with any debts to pay, the sale of your house will always cover what is owed to the lender.
What happens after 12 months?
If a year has passed and the loan remains unpaid, the Lender will carry out a review to agree next steps. Occasionally they will decide to take over the sale of the property, however this is very much a last resort.
What happens when your house sells?
The outstanding balance (amount borrowed and any associated interest) is repaid from the sale of your property. Any remaining funds then go to your named beneficiaries, as they would do normally.
Can your family keep your home?
If you have a home reversion plan then this option is not available, However, with a Lifetime Mortgage should your family wish to maintain ownership then they would simply need to find an alternative way repay the outstanding balance within the allotted 12 months.
This is rare, with most families preferring to keep things simple by using the sale of the property to repay the loan.
Of course, nobody likes to think about moving into care and many customers we speak with often want to use Equity Release to pay for adaptations to their property, or for private care at home, so that they can remain there for as long as possible.
However, none of us know what the future holds and it’s always good to be in the know, especially where your home and finances are concerned.
If you are toying with the idea of Equity Release, can relate to any of the issues raised here and would like to know more then please do get in touch with one of our friendly team.
Thanks for reading, Sarah
You can call us on FREEPHONE 0800 612 6755 or click here to arrange a call back from one of our experts.
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