Using Your Home to Pay for Care: Equity Release & the Alternatives

If your relative needs to pay for their own care, the family home is often the biggest asset available to meet the cost. Selling it isn't the only option — and it isn't always necessary. This guide sets out the main routes, from a deferred payment agreement to equity release and care fees annuities, so you can weigh them up before deciding anything.

Does the family home have to be sold to pay for care?

Not always, and not immediately. Before you assume the house must be sold, check whether it's actually counted in the local authority's financial assessment (means test).

A property is usually left out of the means test if it's still lived in by:

• a spouse or civil partner
• a partner
• in some cases, a relative who is elderly or disabled

In England, there's also a 12-week property disregard at the start of a permanent care-home stay. This gives you breathing space to explore options — such as renting the property out or arranging a deferred payment agreement — rather than being forced into a quick sale. If your relative has health needs that qualify for NHS Continuing Healthcare, the home isn't taken into account at all, because that funding isn't means-tested.

Scotland, Wales and Northern Ireland run their own means-test rules and disregards, which differ from England's. Check with the relevant council or health board.

What are the main ways a home can pay for care?

Once the home is confirmed to be part of the means test, there are five broad routes. Each trades control, cost and risk differently.

When does it make sense to sell the property?

Selling is the simplest route when the move into care is permanent and no one else lives in the home. It releases the full value in one go and stops ongoing bills, maintenance and insurance. The trade-offs are that it's irreversible, can take months in a slow market, and removes the property entirely from any future inheritance. Many families use the 12-week disregard (in England) to weigh this up rather than rushing.

Is renting the property out a good alternative?

Renting keeps the home in the family and produces an income towards fees. It can suit families who think their relative might return home, or who simply aren't ready to sell. But rental income is counted in the means test, it's rarely enough on its own to cover full care costs, and you take on the responsibilities — repairs, tenants, tax — of being a landlord, often while also managing someone's care.

What is a deferred payment agreement, and how does it work?

A deferred payment agreement (DPA) lets the local authority pay your relative's care-home fees now, with the debt repaid later — typically when the property is eventually sold. The council places a legal charge on the home to secure the loan and charges interest and administration fees, so it's borrowing, not free funding.

A DPA is useful when:

• you don't want a forced or rushed sale
• the market is slow and you'd rather wait
• you're renting the property out in the meantime and want time before deciding whether to sell

Not every council offers the same terms, and eligibility rules apply, so ask your local authority directly about their scheme and current interest rate.

Is equity release a good way to pay care-home fees?

Usually not, if the person is moving into a care home permanently. Equity release — a lifetime mortgage or home reversion plan — is designed for someone who continues living in the property. Once they move out permanently, most equity release products stop making sense.

Where it can be relevant:

• one partner moves into care while the other remains in the home
• funding care at home, rather than a care home move

Be cautious. Interest on a lifetime mortgage compounds over time and can erode the value of the estate faster than expected. It can also affect entitlement to means-tested benefits such as Pension Credit. Early-repayment charges may apply if circumstances change. This is a tightly regulated area — take advice only from an FCA-regulated adviser, and use a provider that follows the Equity Release Council's safeguards, including a no-negative-equity guarantee. MoneyHelper has free, impartial guidance on how equity release works and what to check.

What is a care fees annuity?

A care fees annuity — also called an "immediate needs annuity" — is a specialist insurance product. You pay a one-off lump sum in exchange for a guaranteed income, usually paid directly to the care provider for the rest of the person's life.

Its strength is certainty: the cost is capped no matter how long care is needed, which protects the remainder of the estate from being drained by a long stay. Its risk is timing — if the person dies soon after buying it, a large part of the lump sum can be lost, though some products offer capital-protection options to soften this. These are specialist, one-off purchases, so use a regulated care-fees adviser to model whether one suits your relative's health and finances.

Can you give the house away to avoid paying for care?

No — not safely. If a council believes a property (or other asset) was given away, sold cheaply, or moved mainly to avoid care fees, it can treat this as "deliberate deprivation of assets" and assess your relative as though they still owned it. Gifting a home can also trigger tax and benefit complications, and may not achieve what the family intended. If reducing the future cost of care is a genuine concern, this needs to be planned properly, well in advance, with professional advice — not done as a late reaction to a care need.

Who can help you decide?

These decisions involve large sums of money and are often hard to reverse, so specialist advice usually pays for itself. Look for:

• a SOLLA-accredited later-life or care-fees financial adviser
• an FCA-regulated adviser for anything involving equity release or borrowing against the home
• a solicitor for wills, power of attorney and property matters

Age UK and MoneyHelper both offer free, impartial starting points if you're not sure where to begin.