So, how much does a retirement home cost?

From management fees, living costs and exit fees we delve deep ...

Retirement villages are purpose built to offer you everything you need in your later years, from a manageable home to a friendly community, all backed by a team of staff dedicated to helping you out in whatever way you need.

Compared to the struggle of maintaining a large, former family home, and the potential lack of support and even isolation of a more general community, they offer an ideal solution for many people, both couples and individuals.

These specialist villages offer a luxury ‘country club’ lifestyle in your golden years, and so you should expect to pay a luxury price. For most people, who have a large family home to sell, this is not a problem, and there will usually be some capital left over when you down-size. However, the cost of the property is just the start, and you need to be aware of the full cost of a retirement village.

Not Sure About Retirement Villages Yet? Read:

Why a Retirement Village May Be a Good Option for You

Choosing a Retirement Village Checklist 

What Are The Ideal Retirement Villages Near You?

Buying your retirement home

Retirement village prices are not cheap, but they are high quality, and it is unlikely that you will need to do anything to your new home to bring it up to scratch or to make it appropriate for your needs in old age. Most retirement homes are single story, either bungalows or flats, avoiding the need for stairs, although cottages and mews homes are also available at some locations.Man in Forest Walks Back to His Retirement Village While Considering the Costs

Retirement village homes must normally be purchased for cash, rather than a mortgage, but again, this is unlikely to be a problem for retirees who have paid off their existing home. It may be possible to rent at some retirement villages, although this means you will no longer have equity in your property to leave to your children.

If you are struggling to sell, you can opt for a combination of the two, called deferred completion, where you rent until your former home is sold, then buy the property you have been renting.

Alternatively, you can get moving fast, with everything done and dusted for your complete peace of mind, by talking to Yes! Homebuyers. We can provide advice if needed on 0330-037-2677 or 0800-250-3549. Compared to keeping your old property on the market for months, with two sets of costs, a quick sale can actually be quite cost effective.

How much does a retirement home cost?

As well as considering the average cost of a retirement home, you also need to think about the running costs and other expenses, which can be quite substantial. In a recent survey, Saga interviewed 9,500 people and 22% said that one of the main reasons for moving was to free up capital to enjoy their retirement, so it is important to make sure that you will still have money left to do that.

Before choosing to move to a retirement village, you need to find out about all the fees involved. Read the small print carefully and if you are in any doubt as to what you will be charged and when, ask the village owners to explain or talk to your solicitor.

Management fees

The largest cost of living in a retirement village will be the management fee, or service fee. This covers the cost of running the village, including cleaning and staffing the communal facilities, maintaining the landscaped areas, gardening and maintenance for residents, round the clock security and the management team who look after everything and everyone.

This fee varies from village to village but is usually in the region of £500-£700 per month, although it can be as much as £1000 at the top end establishments. This may sound steep, but even then, you may not find that all the facilities are included. You could incur extra costs for things like hiring sports courts or indulging yourself with a spa day or spa membership.

Other fees

Most retirement villages offer properties as leasehold, rather than freehold, which means that you own the building but rent the land on which it is built. This involves an extra cost called ground rent, usually an annual charge of a few hundred pounds per year. As a tenant, you may also be obliged to pay a contingency fee towards the cost of exceptional expenses, such as major repairs or improvements to communal areas. Contingency fees are not optional and can sometimes be a significant surprise cost out of the blue.

Read: Leasehold Vs. Freehold Properties

Billing and living costs

Unlike a nursing or residential care home, it is important to remember that you will still have bills to pay, such as gas, water and electricity bills, and council tax. Often buildings insurance is included in your management charge, but you may have to pay for contents insurance. Other expenses, such as TV licence, broadband, phone line rental and car running costs all need to be taken into account, and you also need to budget for living expenses such as food and entertainment.

Care costs

One of the biggest advantages at some retirement villages, is the availability of nursing care and other support. This means that you can stay put, even as your health deteriorates and your needs increase. You can get help with everything from dressing and washing to putting away your shopping, and some places will even offer medically qualified help on hand 24hrs a day.

Of course, none of this comes for free of charge, and you need to find out what care is available and what this may cost you in the future. Even two or three hours of help per day can run into hundreds of pounds a week, equating to thousands extra every year.

That said, this level of care will usually be more affordable than a nursing home, which can cost £800 or more per week, plus you will be able to stay in your own home and maintain your independence for longer.

Considering the long term

As well as care costs, you also need to think about financing your new lifestyle in the long term. This can be difficult as there are many unpredictable variables, such as the interest rate you will get on your savings, or the effect on your income if your partner dies or has to move into full time care. A report into housing costs for the elderly by the New Policy Institute outlines a number of concerns that you need to take into account and have a contingency plan for.

Read: Advice on Selling a House after a Bereavement

Exit fees

By far the most controversial cost of living in a retirement village is the exit fee. This is payable when you move on or pass away and can range from 10% to 30% of the purchase price. Some villages charge a smaller percentage for each year you have been there, to reflect how much you have used the facilities.

These fees may seem high, but companies say that they are charged in order to keep the monthly maintenance fees lower, in a sort of ‘enjoy now, pay later’ deal, and they are often referred to as deferred management fees to underline this reasoning. The Associated Retirement Community Operators (ARCO) says exit fees can reduce monthly management fees by as much as 40%, and this can make a big difference to the affordability of this lifestyle, especially for residents who are equity rich but cash poor.

Exit fees can come as a shock to your family when they come to sell, and they can make a significant dent in their inheritance. They can also be a problem for people who either need or want to move on to somewhere else, significantly reducing the value of their investment. However, for the many people who see out their days in a retirement village, the exit fees are, quite literally, somebody else’s problem.

Read: The Essential Guide to Wills, Probate and Inheritance

Costs for your family

As well as taking a hit for exit fees, your family will also be liable for all other fees if you pass away and they have to sell your home. This includes paying the monthly management fee until the sale of your retirement home is complete, as well as paying ground rent and other charges.

Even if you use an external estate agent, the retirement village may still charge a sales administration fee of around 1% to cover their costs in helping your agent, and if you want them to actively market the property, they may charge a further 2% on top of this.

Some non-profit villages, such as Anchor Trust, have the right to buy the property back, which can save you on agent’s fees, and they will normally be obliged to pay the full market value. When the sale is completed, an assignment fee will be payable to the freeholder to cover their legal costs in drawing up a new lease.

This may all seem expensive, but your heirs would encounter many of these costs wherever you choose to live.

Read: A Guide to Estate Agent Fees (And Choosing The Right One)

Weighing up the costs of a retirement village

Deciding on a retirement village takes a lot of planning and calculations, and there are many things that need to be considered very carefully before you commit.

However, if you can make it work, it is well worthwhile for the unrivalled lifestyle you will be able to enjoy. As we discussed at the start, this is a luxury option, but if you have the funds to sustain it, why shouldn’t you enjoy a little luxury in your golden years?

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