Right to Buy and Care Costs

chrish99

Hi
My parents are thinking about taking the Right to Buy option on their housing association house. They are offering a 69% discount, and it’s comes with the usual 5 year clause to repay discount if sold. They now have the cash available, soo an easy way to stop paying rent and use that money enjoying retirement. 

My parents are aged 67 and 69.  While I think most eventualities are fairly easy to understand, I’m uncertain about care costs.

E.g Where one parent is left in the house in 2 years time, and they need full time care. I understand the house may have to be sold (it’s probably worth 90k). But the Right to Buy clause says they need to reply 60% of the discount. 

Any thoughts on how this plays out. I guess a worst case is that the house gets sold to cover care costs, and additionally still owe the housing association 60% of the 69% discount they received (approx 42k). 

Or as another train of thought, which type of professional can advise on ensuring this doesn’t play out? Would this be a good conveyancer as part of the house buying process or some other financial advisor, or solicitor?

 Thanks for any help!

dimbo61

Do you think Mum or Dad will need to go into Care ?
The chance to own your home and not pay rent for another 30 years sounds good 
However how will they pay the mortgage every month ?
How goes it compare to Rent they already pay each month ?

chrish99

Thanks for the reply

They are both in reasonable health.. just never really know what the future holds and things can change quickly. 

The purchase price took us all by surprise, such that they have the cash available so no need for a mortgage. 

The rent.. that’s ~£500 a month to the housing association (and they don’t maintain the house very well e.g. double glazing is now 30 years old and leaky, but they won’t replace). At that amount, they would recoup the purchase price in 4.5 years of not paying rent. Soo if they live another 30 years.. life changing!

They are both on state and work pensions now so should be no problem covering normal house costs, and some money left for maintenance. 

So seems a no brainier.. I’m just trying to think through any scenarios that could catch them out. Like the house people sold within 5 years for care costs, but then still owing the housing association. 

silvercar

"E.g Where one parent is left in the house in 2 years time, and they need full time care. I understand the house may have to be sold (it’s probably worth 90k). But the Right to Buy clause says they need to reply 60% of the discount. "

If the house is in joint names and only one person needs care the house doesn't need to be sold.

Mojisola

silvercar said:

"E.g Where one parent is left in the house in 2 years time, and they need full time care. I understand the house may have to be sold (it’s probably worth 90k). But the Right to Buy clause says they need to reply 60% of the discount. "

If the house is in joint names and only one person needs care the house doesn't need to be sold.

It doesn't matter whose name is on the deeds - if one of a couple needs care and the other will stay in the house, its value isn't counted in the financial assessment.

One the other hand, if the couple have capital, the name on those accounts does matter - it's wise to spread any capital as evenly as possible between the two.

chrish99

Thanks both

 i guess I was thinking worst case when one parent is sadly no longer here, and the one remaining parent needs full time care. I’m sure a very unlikely situation to unfold in 5 years.. but if there is a possibility that the remaining parent needs to sell the home for care, but then still owes the housing association £10k’s in discount repayment due to a clause in the Right to Buy paperwork it’s worth knowing now. 

Or would the discount repayment come out of the money the house is sold before with just the remainder going towards care costs?

dimbo61

Your worrying about something that Might never happen ?
If your parents have the money then buy the property  ASAP.
The rent is only  going to go up in the next few years.
Once they own the property they can do what they want with the place

Hedgepigs

Mojisola said:

silvercar said:

"E.g Where one parent is left in the house in 2 years time, and they need full time care. I understand the house may have to be sold (it’s probably worth 90k). But the Right to Buy clause says they need to reply 60% of the discount. "

If the house is in joint names and only one person needs care the house doesn't need to be sold.

It doesn't matter whose name is on the deeds - if one of a couple needs care and the other will stay in the house, its value isn't counted in the financial assessment.

One the other hand, if the couple have capital, the name on those accounts does matter - it's wise to spread any capital as evenly as possible between the two.

I read that as if one sadly passed and the remaining needed care. Which even if the discount did need to be repaid out of the proceeds of sale, the remaining funds would be used to fund the care the same as if it had been sat as cash in the bank. So no worse off other than hassle of selling and sorting out. And also given they are in good health, a rather unlikely scenario - though useful to consider all options.

In either case, I can't see it being a big problem. I think the paying (and associated hassle of organising)  for the upkeep would be the biggest thing to consider if they use all their savings to buy, especially if it has not been kept very well by the council. Obviously the savings from rent will go a long way to even it out.

Brie

Well there's care and then there's care....

If one goes into a care home and the other is in the house then the house can't be sold or taken into account on determining who pays for the care home.  If they are renting and have a large amount of cash (which sounds like is the case now) then that cash will be used to pay for care home fees until savings get down to around £23k for that person (so £46k in a joint account).

If when only one is left in the house and care is provided in the house then the house cannot be sold to pay for care.

Obviously they may decide they want to sell the house if they both go into a care home to ensure they get a quality spot but that's a different discussion.  It may be a good idea to check if there's any clause about discounting when it's due to moving into care.

chrish99

Thanks. And yeah, unsurprisingly (as they’ve lived in that house for 39 years) both are adamant they’ll never leave it for a care home. 

Perhaps I’ve misunderstood the rules too. 

Is it that the house is sold/taken for care costs. Or is it more that, for the one remaining parent, the house forms part of their total assets. Hence their assets are the house, cash and other things? 

And if so, is it assets after debts have been paid off. I.e. if they had a bank loan, is that subtracted from their assets before the final figure is used to calculate care cost contribution?

Appreciate (and apologies) my terminology might be way off. Does this whole care cost contribution and the rules have a name or somewhere where I can go read up on all the details?

housebuyer143

I believe you have to repay the HA within 5 years as a charge on the deeds, so that would be repaid before any proceeds were paid out so I imagine that the amount due to them would not be taken into account for care costs.