The latest Nursing Home Support Scheme
(Amendment) Act 2021 permits residents to sell their primary residence after
three years in care. The 3-year cap also applies to the Fair Deal Nursing Home Loan Scheme,
where you must repay the loan with a cap of 22.5% (7.5% annually for three
years) or 11.5% for couples (3.75% annually for three years).
The remaining proceeds, however, will not be
considered a cash asset under the scheme. This loan can be repaid early at any
time and is not subject to fair deal coverage. Now does that make this life
loan any easier? Let’s find out in this blog.
How the Fair Deal Loan
Repayment Works in 2023
The Fair Deal Ancillary State Support
programme allows people who need nursing home care to postpone paying the
amount of their "asset contribution" toward their house, farm, or
company as a form of life loan.
This is part of the nursing home support scheme cost of care,
which also incurs 80% of any cash assets like savings, deposits, bonds, shares,
etc. The deferred payment, worth 11.5% for couples and 22.5% for singles, would
need to be paid after the passing of the resident of the nursing home.
What is the Asset Transfer
Process?
The concept of "transferred asset"
was left unchanged in the 2021 Act. It still refers to an applicant's interest
in an asset (whether cash or real estate) that has been transferred at any time
in the five years before the date on which the application for state support is
first made and for the following purposes:
●
Free Will Transfer
(voluntary, no consideration)
●
Consideration of names
●
Less than 75% of the
transferee's anticipated stake in the asset's market value at the time of the
transfer as consideration
The descendants of the owner of the estate
must present a copy of the schedule of assets to the HSE at least three months
before the estate is distributed. And they have to wait until the HSE sends a
clearance of outstanding debts. Accurate valuation and timely declaration of
the assets are the only ways to simplify the application process.
Understanding "Asset
Contribution" for the Fair
Deal Scheme
In Ireland, housing costs are steadily
rising. The average cost of a house in Ireland at the end of 2022 will be
€370,000. Such an amount is almost eight times the average salary of €48,000.
The Health Service Executive (HSE) will not
reduce the property valuation for a life loan while evaluating an applicant's
Fair Deal assets. Therefore, the applicant or their children will typically
have a sizeable payment to make, and the computation won't be based on the home's
net equity. So note the following key points that go into the life loan:
●
The HSE will not reduce the
property valuation for a life loan while evaluating an applicant's Fair Deal
assets.
●
The HSE will not permit the
applicant to obtain a nursing home loan to cover their property asset
contribution.
●
The life loan provider will
have a first charge on the property, and daily interest charges will keep the
equity from growing.
The descendants of the person living under
nursing home care are typically responsible for the debt repayment. As a result
of annual statements revealing growing debt levels, many families managing
these life loans since the 2009 scheme policies have found themselves in a bad
situation and regretting their decision. However, new applicants in 2023 might
not make the same mistake. Dedicated firms like Fair Deal Advice are helping new applicants make better decisions by
considering the future from a bigger perspective.
Selling The House To Repay
The Loan
The nursing home loan appeals to applicants
who don't have sufficient savings and can use the house to pay for the loan.
However, you must consider that with this kind of life loan, you pay pricey
compound interest in addition to interest on the principal amount borrowed.
Selling the house or other asset property is
the standard practice to repay the debt, and then the HSE will determine their
contribution based on the net earnings, if any, of the sale. But this poses a big
problem if you already have a spouse or other family member living in the
house.
The loan may be available to those who do not
have a spouse living in the home or who are concerned about asset transfer,
allowing them to use the property to pay for nursing home care.
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