For many families in the UK, the rising cost of long-term care presents a major financial challenge. The average care home fee now exceeds £40,000 annually, leaving many older adults and their relatives searching for sustainable ways to cover expenses without immediately selling the family home.
Two popular financial solutions have emerged: reverse mortgages (often called equity release) and care home loans(specialist lending designed for care costs). Both options allow individuals to access funds while retaining ownership of their property, but they operate differently and suit different circumstances.
This article explores the advantages, drawbacks, and key differences to help families make an informed decision in 2025.
What Is a Reverse Mortgage (Equity Release)?
A reverse mortgage, also known as a lifetime mortgage, enables homeowners to unlock some of the value of their property without selling it. The loan is repaid when the individual dies or moves permanently into long-term care, usually through the eventual sale of the home.
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Key features:
- Tax-free lump sum or regular income.
- No monthly repayments required in most cases.
- Interest is rolled up and repaid when the property is sold.
- You remain the legal owner of your home.
What Is a Care Home Loan?
Care home loans are financial products specifically designed to cover the costs of moving into a care facility. They can be short-term bridging loans, deferred payment agreements arranged with local councils, or private bank products tailored for care funding.
Key features:
- Immediate access to funds to pay care home fees.
- Can be structured as short-term or rolling loans.
- Flexibility to repay once assets are liquidated (for example, after selling a property or accessing savings).
- May be secured against the property or other assets.
Comparison: Reverse Mortgages vs. Care Home Loans
| Criteria | Reverse Mortgage (Equity Release) | Care Home Loan |
|---|---|---|
| Purpose | Unlocks property value for general or care-related expenses | Specifically designed to pay for care home fees |
| Repayment | Repaid when property is sold (after death or permanent care move) | Repaid once funds become available, often from property sale or estate |
| Ownership | Homeowner retains ownership of the property | Usually secured against the property; ownership retained |
| Interest | Accrued and compounded annually until repayment | Interest may be lower, but repayments may start sooner |
| Flexibility | Can be used for a wide range of expenses, not just care | Tailored directly to cover care costs; often more restrictive |
Which Option Is Better for Families?
The answer depends on financial priorities:
Reverse Mortgage (Equity Release):
Best for those who want flexibility, do not need immediate liquidity for short-term care bills, and prefer not to make monthly repayments. However, compounding interest can reduce the value of the estate left to heirs.
Care Home Loan:
More appropriate for families who need quick access to funds specifically for care and plan to repay once assets (such as the home) are eventually sold. These loans often involve lower total interest if repaid sooner, but can add financial pressure if repayment is delayed.
For many families, combining solutions, such as using a deferred payment agreement from the local authority alongside equity release, offers a balanced way to manage care funding without losing the home.
For more guidance on paying for care, visit the UK Government – Paying for Your Care.
FAQ – Reverse Mortgages vs. Care Home Loans
Do I lose my home with a reverse mortgage?
No, you remain the legal owner, but the loan plus interest is repaid when the property is sold.
Is a care home loan the same as equity release?
No. Equity release provides long-term funds secured on the home, while care home loans are short-term solutions for covering immediate care fees.
Which has higher costs overall?
Reverse mortgages usually accrue more interest over time, whereas care home loans may be cheaper if repaid quickly.
Can I combine both options?
Yes. Some families use a care home loan for short-term expenses and equity release for longer-term financial planning.
Are there government-backed schemes available?
Yes. Deferred payment agreements offered by local councils allow care costs to be deferred until the property is sold.
Choosing between a reverse mortgage and a care home loan is one of the most important financial decisions families in the UK face when planning long-term care. The right solution depends on your financial situation, care needs, and estate planning goals.
Need help finding a care home?
Senior Home Plus offers free personalized guidance to help you find a care facility that suits your health needs, budget, and preferred location in the UK.
Call us at 0203 608 0055 to get expert assistance today.
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