Downsizing to fund elderly parent’s long-term care

You may need to find a way of self-financing your parent’s long-term care and your parent’s own a home might be larger than they need. Could downsizing be the answer?

Selling your parent’s existing home and buying a smaller, less expensive one instead could free up money to pay for care costs

How does downsizing compare?

Downsizing seems a much more straightforward option than some of the other self-financing options available, but there’s a lot to consider

Downsizing v equity release

Downsizing probably won’t raise as much money as an equity-release scheme, but it will usually be a more cost effective option. Home reversion plans (where you sell all or a part of a house, but retain the right to live in it) only ever offers a fraction of a property’s market value, whereas when you downsize, you sell your property on the open market

Downsizing v immediate need care fee payment plan

An immediate need care fee payment plan works a bit like an annuity. You pay a lump sum and are provided with guaranteed income for life to fund your parent’s care

This can give you the reassurance of knowing that your parent will receive a regular payment to cover the costs of their care for as long as they need it. But they might have to sell their home to buy the plan in the first place, leaving them with no property to pass on to the family. If they downsize, they’ll have the smaller property to pass on in their will

Downsizing v investments

With downsizing, you know the figures you’re dealing with and exactly how much money your parent will have to put towards their care costs. If they were using investments to pay for care, the return they make might rise and fall with the value of the funds and might not be sufficient to cover  care costs

Downsizing v insurance

With insurance products, not only do you pay ‘just in case’, there’s always the chance they won’t cover everything your parent needs

With downsizing, your parent stays in control of your funding and there are fewer complex legalities for others to deal with after they die

Additional benefits of downsizing

Moving to a bungalow, a serviced apartment in a retirement village or into sheltered housing can bring other advantages you might not have considered

• The new home might be easier to maintain
• Accessibility might be easier, so your parent can stay in their home for longer
• A move might actually reduce the cost of  care, although modifications to the new property – such as installing a stair lift, or extending or converting a ground floor space – can be expensive

Do the sums

Step 1 – What are your care costs likely to be?

Click HERE to work out the total cost of your care using a care-costs calculator

Step 2 – How much will you raise by downsizing?

Check how much your parent’s property might be worth, along with the likely costs of a smaller property, using an online property valuation guide

Step 3 – Work out how much it will cost your parent to move

Make sure you get proper estimates. It’s estimated that four out of ten people spend more than expected on their new home

Working out if downsizing will raise enough money to cover the cost of  care is a serious business. Don’t just take a stab at the figures – get proper quotes from everyone involved

Other things to consider

Care costs may rise as your parent gets older, so remember to factor that into your calculations. As a last resort though, you will have equity in the smaller property you buy, which you can always release at a later date if you really need it

Finally, consider the other pros and cons of downsizing that go beyond your finances. Selling and buying can be a stressful process, and moving to a smaller property or new location may affect your quality of life. But downsizing can also make your day-to-day life easier and may give you the opportunity to move closer to friends or relatives

We’ve teamed up with The Senior Moves Partnership to offer you an expert downsizing service, so call now on 0800 044 3904 and quote myageingparent

Or fill in the form below for more information

Disclaimer: All services are provided by The Senior Move Partnership and myageingparent.com has no responsibility or liability for the services provided by The Senior Move Partnership. All requests and complaints should be addressed directly to The Senior Move Partnership. myageingparent.com bears no responsibility for goods and services purchased via third parties featured on this website.

This article is provided by the Money Advice Service.