I decided to write this article as in recent times I have seen an increase in advertising of Life loans which are loans provided typically to persons over 62 against the value of their homes to help fund retirement or to buy items that funds are not available for. The loans are usually repayable at death and in the meantime, interest is charged at quite high rates and accumulates using compound interest. For many by the time they die, and the loan becomes repayable the equity in their homes is significantly eroded leaving little for their estate.
At Fair Deal Advice we from time to time come across older persons looking to apply for the Fair Deal who have previously taken out Life loans. This type of loans can cause serious problems when looking to apply for a subsidy under the Fair Deal and in some cases can prohibit the Applicant from being able to apply for the Nursing Home loan scheme.
As many of these loans are taken out to fund lifestyle the HSE will not deduct the balance of the loan against the property value when calculating the property asset contribution. They will in most case refuse to give a loan against the property to help fund the cost of care contribution. This can result in the Applicant not having the funds to pay for their care cost contribution. While single applicants may be able to sell their homes, couples will not have this option.
So, if you or your relative are considering taking out a life loan I would urge you not to. That new car and new kitchen that you may have always wanted and for which you may be looking to take out the Life Loan for may have serious implications in your ability to fund yours or your Partner’s long-term care in the future.