By Tom Philips at August 30, 2023

Does Equity Release Affect Disability Living Allowance?

If you are currently considering equity release, then you might be questioning ‘Does equity release affect disability living allowance?’ Thankfully, this is not the case, as discussed further below.

Does equity release affect disability living allowance?

Have you ever heard of equity release, but are confused when it comes to what it actually entails? If so, then you are not alone. Equity release is a way for over 55’s to gain access to the equity in their home, without having to sell their property.

Most retirees find themselves struggling on their pension, and end up downsizing later in life to fund their retirement and lifestyle. Afterall, we all dream of the perfect retirement, full of holidays and days out.

However, many people simply do not want the hassle of selling their house, especially not in their old age. Besides, you’ve probably created memories in your home, which would be hard to say goodbye to.

This is where equity release comes in. Equity release allows you to gain access to the equity in your home (including your monthly mortgage repayments, your initial deposit and the increase in value your house has probably benefited from).

When you choose an equity release plan, you do not have to repay your loan until after you pass away or move into a care home for health reasons. This means that your loan lasts for as long as you live and you do not have to worry about any monthly repayments as you do with a traditional mortgage or loan [1].

However, if you are worried then rest assured that all equity release loans benefit from a no negative equity guarantee. This guarantee means that the loan is always responsible for paying off the difference, not you or your next of kin [1].

As with every loan, you will be charged interest. This interest will quickly turn into compound interest, as the loan will continue every year for as long as you live. This means that the overall loan amount will grow interest year on year.

Most people opt for lifetime mortgages and home reversion plans. Which type of plan you will opt for will depend on a number of qualifying factors, including your age and your current health status.

Applying for an equity release loan is easy. You will need a number of documents in place, an equity release solicitor and adviser.

If you would like more information on ‘Does equity release affect disability living allowance?’ then talk to a member of the team at Equity Release Warehouse by calling our helpline on 0330 058 1579.

What impact will taking out an equity release loan have?

Whilst equity release has many benefits, it will have a huge impact on your life. For example, you will be charged interest on your loan which you should prepare your loved ones for. This means that they might receive less inheritance than they once hoped for.

Likewise, if you want to opt out of your equity release loan then you might have to pay an early exit fee. Likewise, you will have to pay a number of fees in order to apply for your equity release loan. This will include a house valuation, the cost of an equity release solicitor and an adviser.

If you want more information on how taking out an equity release loan might impact you, or whether or not equity release affects disability living allowance, then talk to a member of the Equity Release Warehouse team.

What benefits are affected by equity release?

If you are contemplating equity release for you and your family then you are not alone. However, it is important to understand that opting for equity release might have a huge impact on things such as benefits.

If you are currently receiving any means-tested benefits, then these will most likely be reduced or cancelled altogether. This includes things such as Pension credit, Universal Credit and any Council tax reductions that you might benefit from.

Which benefits are not affected by Equity Release?

Whilst lots of means-tested benefits will be affected by taking out an equity release loan, there are also a number of other benefits which will not be affected by taking out an equity release loan. In fact, this leads lots of people to question ‘Does equity release affect disability living allowance?’

There are some benefits which are not affected by taking out an equity release loan including disability benefit and personal independence payment, also known as PIP. These are benefits which help with the costs of any long-term health or disability issues for people aged over 16 years old.

Does equity release affect disability living allowance?

According to the Government’s DWP Benefits Statistic, approximately 1,210,000 people are currently claiming Disability living allowance, with a further 1,320,000 people claiming Carer’s allowance [2].

In fact, ever since the cost of living crisis, those with disabilities and additional care needs are suffering more than ever, which has led to a substantial increase in people claiming this type of benefits allowance.

If you want to release equity from your home and are currently claiming benefits, then this will be taken into consideration upon applying. These are usually benefits which are means-tested.

However, disability-related benefits are always paid to anyone who needs them, regardless of your income and savings. This means that opting for an equity release loan will not affect your eligibility for disability-related benefits.

In addition to this, your eligibility for other help such as the winter fuel payment, free eye tests and healthcare / NHS prescriptions will not be affected by opting for an equity release loan.

If you would like more information on ‘Does equity release affect disability living allowance?’ then talk to a member of the team at Equity Release Warehouse by calling our helpline on 0330 058 1579.

Can I make home improvements using my equity release money?

If you are currently receiving disability living allowance, then you might choose to release equity from your home in order to make some home improvements and modifications in order to make your home as suitable and comfortable as possible for you and your care needs.

This might mean that you are able to remain living in the comfort of your own home for longer, without having to move into a care home in later life.

In fact, there are some small modifications that your council might help you to pay for. For example, this could include work towards a wet door, a ramp inside the house, a wider door to fit a wheelchair or anything else that might cost less than £1,000 [2].

What counts as savings for benefit eligibility?

It is important to understand what is and is not considered as savings when it comes to means-tested benefits, as this might affect your plans to opt for equity release.

According to Entitled To, you are not eligible for means-tested benefits if you have capital over £16,000 [3]. These savings include things such those listed below.

Cash in the bank
Income bonds
Stocks and shares
Lump sums taken out of a pension fund
Redundancy pay

If you are confused as to what and what does not count as savings when it comes to means-tested benefits, then talk to a member of the team at Equity Release Warehouse.

How does equity release affect other things, such as my pension?

If you are currently considering taking out an equity release loan, then you might be worried about how this might impact your pension, whether that’s a state pension or private pension.

However, you will be relieved to hear that opting for an equity release loan will not affect your state pension, as your equity release funds are classed as a loan and not income.

What help is out there for me?

If you are receiving disability living allowance but are currently struggling, then it is important to understand that there is help out there for you. For example, many charities will be able to offer you grants and other financial support for those who need it.

For example, Independence at Home financially supported over 1,000 people between April 2022 and April 2023 [4] to help people living with a disability and long term illness to cope during challenging times.

Likewise, the Home Improvement Agency (HIA) also helps people to apply for funding and help to make improvements around the home.

If you would like more information on ‘Does equity release affect disability living allowance?’ then talk to a member of the team at Equity Release Warehouse by calling our helpline on 0330 058 1579.

Next steps

If you are currently receiving disability living allowance and would like more information on the pros and cons of taking out an equity release plan, then talk to our team at Equity Release Warehouse for free and professional advice and support.

If you would like more information on ‘Does equity release affect disability living allowance?’ then talk to our team by calling us on 0330 058 1579.