12 min read

Paying for care homes: how can you afford it?

Care homes may get a bad rap in popular culture, with TV shows like The Simpsons portraying them as miserable places, full of loners terrorised by authoritarian minders.

A nurse brings cereal and orange juice on a tray to an older man sitting on an armchair, his walking stick propped against the chair.

In reality, the quality of "old folk’s homes" has improved a lot in recent years. Which is just as well, considering the number of Brits currently living in one has surpassed the 400,000 mark, according to a 2016 Laing and Buisson survey.

The care-home market will only grow as the population ages, increasing the need for families to understand the range of options available, and how they can afford to pay for care.

Will I need to consider a care home?

Individuals facing the onset of debilitating physical or mental illnesses, such as dementia, are often those most in need of care homes.

One-in-14 British residents over the age of 65 suffers from dementia – with women more likely to be affected than men – according to the most up-do-date figures from the Alzheimer's Society. The proportion is only set to increase, due to better diagnosis and treatment advances. Around 2 million sufferers are expected by 2051, up from around 850,000 in 2015.

Other afflictions suffered by care home residents can include stroke and a lack of mobility brought on by severe arthritis or joint replacements.

If a family member is afflicted, relatives face a big choice: keep them in their property to be looked after by a relative, pay for an outside carer to visit, or move them into a care facility.

At-home carers, who visit regularly, can charge anywhere between £10 and £30 pounds per hour, according to the UK Aged Care Guide. That's not too bad for someone who only needs assistance for two hours a day. However, people needing around-the-clock care may need to pay hundreds of thousands of pounds a year for the privilege.

How much do care homes cost?

Those fortunate enough to reside at Chelsea Court – a specialist home for dementia sufferers – will have to stump as much as £3,000 per week, which converts to £156,000 per year. That's well above the national average cost for a care home, though, which came in last year at £600 per week, or £31,200 per year, according to research by Knight Frank .

That average figure solely applies to residential care homes, where only basic assistance, such as help with meals and bathing, is offered. Rates at nursing homes, where medical professionals are on hand, averaged out at £726 per week, or £37,752 per year.

The average amount of time Brits spend in a residential care home is two-and-half years, generating a total cost, based on the average figures above, of £78,000. Total nursing home costs, while more expensive per year, are usually lower because people tend to spend shorter time periods in them.

It's also important to note that prices vary between geographic locations. The average cost of a care home in Scotland, for example, is around 45% cheaper than in East England, according to research by Royal London .

Who pays for care homes when money runs out?

Wherever you live, the good news is that government assistance is available, either for at-home care or for a care home – but only if you meet a certain income threshold.

Currently, individuals with less than £14,250 in savings and assets are entitled to full support from their local authority, though they'll have to contribute to care costs from any income they're still receiving, such as their pension.

Individuals with more than £14,250, but less than £23,250 will get partial coverage from their local authority, while those with more than £23,250 will not get any support at all.

For those going into a care home, the threshold calculation includes any value tied up in the family home, unless a partner or another dependent still lives there. For those opting for at-home care, the value of the property isn't counted in the threshold calculation.

Can, and should, I use my property to pay for care?

Theresa May's short-lived "dementia tax" received plenty of bad press, mainly because it proposed including the value of a person's property in the means test for government support for at-home care.

But using some of the wealth tied up in your property to fund care costs isn't such a bad idea, whether it's via selling your home outright, renting it out, or taking out an equity release product, such as a lifetime mortgage.

Equity release could, for example, come in handy if a relative needs to go into a care home, but their spouse still wants to live in the family home.

Other ways you might pay for care

Of course, for those with money in the bank, investing in an annuity that pays a regular income stream could be a better option than selling the family home. People moving into a care home can also consider a "deferred payment" agreement, where their local authority covers the cost of care upfront, but recoups the money from the sale of their home after they die.

Alternatively, equity release involves borrowing money against the value of a property that isn't repaid until the property is sold after you die or move into permanent care. This option could work for individuals looking to fund care in their own home that don’t qualify for government support.

Should I use equity release to pay for care?

There are a number of pros and cons of equity release, but regardless of the situation it's important to consult a financial adviser to identify the plan that's right for you, or if another option better suits your circumstances.

The important thing to remember is that paying for care does not mean you need to sell your home – there are plenty of options available to help fund such a big life decision, with equity release just one way to do so.

Written by Ross Kelly - Financial Journalist

Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. The opinions expressed within this blog are those of the author and not necessarily of OneFamily.