In 2014 the Living Longer, Living Better reforms were introduced by government to improve the accessibility, sustainability and quality of aged care in Australia.
However, since then, the downside for consumers is higher aged care costs. These can be significant, depending on the type of accommodation chosen, and the geographical location of the facility. Nowadays, if you have a family member going into aged care you may confront several fee layers, such as the following.
- Refundable Accommodation Deposit (RAD)
- Daily Accommodation Payment (DAP)
- Means-tested daily fee
- Daily care fee.
The RAD is often the most difficult to pay. It’s an upfront lump sum payment to the aged care facility. Families are often shocked to find they may need to raise between $300,000 and $500,000 - and in some cases even more – if they want to pay for residential aged care with a lump sum via a RAD rather than paying a DAP on an ongoing basis.
A common misconception is that the family home needs to be sold to provide access to funds to pay this lump sum RAD. This can be a distressing outcome for families. However, in many cases the home could be retained by using a reverse mortgage to fund aged care entry costs.
Avoid selling your home with a reverse mortgage
If you or an elderly family member has limited available cash to pay for a RAD, or other aged care fees, there is an option to avoid selling the home – an Aged Care Option reverse mortgage with Heartland. Depending on borrower age, you could release as much as 50% of the home value.
It’s also one of the few specialist aged care reverse mortgage loan products available in Australia, and offers an important funding alternative to those entering residential aged care, and their families.
With a 5-year loan term and no need for ongoing loan repayments (the interest is added onto the loan monthly), the Aged Care Option can provide families much needed relief. You can keep the family home and release equity to pay for aged care costs, such as the lump sum RAD or as regular advances to fund ongoing DAP. Depending on your circumstances, some other benefits may include a potentially lower impact on the aged pension (compared to selling the home to pay for aged care costs), and may save you and the family a substantial sum over time.
See some helpful aged care resources below.
Benefits of using a reverse mortgage for aged care expenses
Flexible cash flow
Tell us how much you need for your RAD and, if eligible for more, you may be able to set up a regular advance and/or cash reserve that you can use for other ongoing care expenses.
No need to sell your home
You retain ownership of your home, providing breathing space to make future decisions.
No regular repayments required
However, you can make repayments if you wish without penalties. The debt is ultimately repaid from the future sale of your property, once you decide to sell or after you pass away.