UK 55+ homeowners: Equity release for home care with adviser checklist
Equity release can fund care, but it suits home care and short to medium term needs far better than permanent residential care. It releases cash from your property without monthly repayments, though the loan grows over time and can reduce what you leave behind, affect means-tested benefits, and may be more expensive than alternatives, so it’s worth checking first.
TL;DR:
- Equity release is most suitable for funding home care, short-term needs, or adaptations, rather than supporting permanent residential care placements.
- The typical loan depends on age and property value, with older borrowers able to release a higher proportion of equity, but interest compounds over time and can erode remaining inheritance.
- Safeguards such as the No Negative Equity Guarantee and early repayment charge waivers for permanent care moves protect borrowers from losing more than the property’s value.
- Alternatives like downsizing, deferred payment agreements, or pension income may offer more cost-effective or flexible options, especially for long-term residential care.
- Releasing equity can impact means-tested benefits and reduce inheritance, so staged releases and early family consultation are recommended.
Table of Contents
- How equity release works for care costs
- When equity release suits home care versus residential care
- Protections worth knowing: NNEG, ERC waivers and FCA rules
- Alternatives to equity release for funding care
- How equity release affects benefits, inheritance and housing choices
- Checklist: what to ask an adviser and what to bring
- A broker’s view on funding care through property
- How we can help you weigh up your options
- FAQ
- Sources
How equity release works for care costs
Two product types sit under the equity release umbrella. A lifetime mortgage is a loan secured against your home: you retain ownership, and interest rolls up unless you choose to pay some of it. Home reversion means selling part or all of your home to a provider in exchange for cash, while keeping the right to live there rent-free.
With a lifetime mortgage, you can usually take a lump sum, a drawdown facility you draw from as costs arise, or a mix of both. The amount available depends heavily on your age and your property’s value, with older borrowers typically able to release a higher proportion of equity, according to Which?.
Repayment is triggered by:
- Sale of the property, usually after death or when you move into long-term care permanently.
- Interest that compounds on the amount borrowed, which can erode equity faster than many expect.
- A move to a new home, which is possible on most plans (portability) but subject to the new property meeting lending criteria.
When equity release suits home care versus residential care
Equity release tends to work best when you want to stay in your own home and need cash for care visits, adaptations, or a live-in carer, rather than funding a permanent move into a care home.
- Good fit: you have limited savings but substantial home equity, and want to remain in familiar surroundings while paying for care at home.
- Good fit: you need to bridge a temporary shortfall, for example while a property sale or benefits assessment is pending.
- Poor fit: you are moving into residential care permanently, since many plans become repayable at that point, as outlined by Age UK.
- Poor fit: preserving inheritance matters to you, or you are likely to qualify for substantial local authority support once your assets fall below the relevant threshold.
Protections worth knowing: NNEG, ERC waivers and FCA rules
Three safeguards matter most when you weigh this decision.
- The No Negative Equity Guarantee means you, or your estate, will never owe more than the property’s sale value, provided the plan meets Equity Release Council standards. It doesn’t cover unpaid fees or cases where the property has been neglected.
- Under the Council’s Standards 2.0, member providers must waive early repayment charges when you move permanently into long-term care, provided a medical certificate confirms this.
- The FCA expects personalised, documented advice for later-life borrowers and has intervened where promotions or recommendations fell short of that standard.
The waiver on early repayment charges for permanent care moves, set out in the Equity Release Council’s Standards 2.0, removes one of the biggest financial risks of taking out a plan before you know whether residential care will be needed.
Alternatives to equity release for funding care
Before committing to a lifetime mortgage, it’s worth weighing these routes.
- Deferred payment agreements (DPAs): a local authority defers care charges against your home up to an equity limit, reviewed once 50 to 70% of that limit is used, according to Age UK.
- Downsizing: selling and moving to a smaller property releases cash without ongoing interest.
- Immediate needs annuities or pension drawdown: these can provide a predictable income stream for care fees.
- Remortgaging to release equity, second-charge loans or regulated bridging finance: these can work for short-term needs but carry monthly repayment obligations that may not suit a fixed income.
- Before folding existing debts into a lifetime product, free debt advice is worth seeking, since consolidating unsecured debt into a secured loan carries long-term consequences.
How equity release affects benefits, inheritance and housing choices
A cash lump sum from equity release counts as capital and can reduce or remove entitlement to means-tested benefits such as Pension Credit or help with care costs, since local authorities assess your assets against set thresholds.
- Releasing equity in stages, rather than a single lump sum, can limit the effect on benefit assessments.
- Average weekly care home costs range from roughly £1,095 in the North East to £1,456 in London, so the amount you might need varies significantly by region.
- Interest roll-up reduces the equity remaining for your estate, so discussing plans with family and an adviser early helps set expectations.
- Keeping a reserve facility rather than drawing the maximum lump sum preserves flexibility if care needs change.
Checklist: what to ask an adviser and what to bring
Good advice under the FCA’s Consumer Duty challenges assumptions and documents why a plan suits your circumstances, rather than defaulting to the first option offered.
- Ask whether the Key Facts Illustration covers all fees, the interest rate, and how the balance grows over 10 and 20 years.
- Confirm the plan carries a No Negative Equity Guarantee and an early repayment charge waiver for permanent care moves.
- Ask what alternatives were considered and why equity release was recommended over them.
- Ask how the plan might affect any means-tested benefits you currently receive or expect to claim.
- Bring income and savings statements, your current mortgage details, your will, and any Lasting Power of Attorney documents.
Pro Tip: Ask your adviser to walk through a worst-case roll-up scenario in writing, not just the headline example, before you sign anything.
A broker’s view on funding care through property
Most clients who ask us about this have the same worry: enough equity in the house, not enough liquid cash, and a fear of getting it wrong. The right answer almost always depends on whether care is needed at home or in a residential setting, and whole-of-market advice is the only way to compare that properly against the alternatives.
— Paul
How we can help you weigh up your options
We provide independent, whole of market mortgage advice from our base in East Sussex, and we’re local and available to talk through lifetime mortgages alongside remortgaging, secured loans and debt consolidation mortgages.
- We compare lifetime mortgage options against remortgaging and secured loan routes so you see the full picture.
- We run affordability checks and talk you through your Key Facts Illustration before you commit to anything.
- We also support self-employed clients and CIS subcontractors with contractor mortgages and borrowing solutions for enhanced income, where care funding sits alongside other borrowing needs.
Get in touch to book a consultation and bring the documents from our checklist above: our mortgage advice and fees page sets out what to expect from the process.
This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.
FAQ
How does equity release work in the UK?
Equity release lets homeowners release cash from their property, either through a lifetime mortgage secured against the home or by selling part of it through home reversion. Most plans, particularly lifetime mortgages, require no monthly repayments, with the loan and rolled-up interest repaid when the property is sold.
How can I stop my house being sold to pay for my care?
A deferred payment agreement lets your local authority defer care charges against your property instead of forcing a sale, provided your case meets its eligibility criteria. Equity release is another route that avoids an immediate sale, though it’s generally better suited to funding care at home than to permanent residential care.
What is the average cost of long-term care in the UK?
Average weekly care home costs range from about £1,095 in the North East to £1,456 in London, so the figure depends heavily on where you live. Home care costs vary separately depending on hours and level of support needed.
What is the cheapest equity release rate in the UK?
Rates change regularly and depend on your age, property value and the plan’s features, so there’s no single fixed answer. Comparing whole-of-market options with a qualified adviser is the only reliable way to find the most competitive rate for your circumstances.
Sources
- Average care home costs in the UK
- The Standards (Equity Release Council) 2.0
- Action needed to ensure good outcomes for later life mortgage borrowers
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