Traditionally people have often sold their family homes to pay for entry fees (what were known as ‘Accommodation Bonds). But with the government’s current emphasis on a ‘user pays’ system, retaining their homes and using aged care finance (such as a Reverse Mortgage) is an increasingly attractive option.

In July 2014, the Living Better Living Longer reforms came into force. People moving into aged care are now required to pay one of the following as an ‘entry fee’ for aged accommodation:

The ‘RAD’ is an upfront lump sum payment to a nursing home. The fee is set by the facility, and although the current average payment amount could range from is $300,000 to $400,000, it can be much higher in some areas.

In addition, a new ‘Means-Tested Daily Fee’ has been introduced which may add significantly to your overall care costs if the house is sold. Using a Reverse Mortgage to fund or part-fund your aged care accommodation is now a viable alternative for you.

Looking into the fees and charges associated with aged care finance can be quite confusing. It is beneficial to take professional help before deciding on your aged care finance. Seniors First has some valuable resources and access to a number of lenders who can provide Reverse Mortgages to pay for aged care following the guidelines set by the Government. This allows the borrower to release up to 45% of the home value (depending on the age of the borrower) with no requirement for regular monthly repayment - the interest is capitalised each month onto the loan balance.

The amount borrowed, plus any accumulated interest (including compound interest) and fees are then repaid when the property is eventually sold.

So, for pensioners and retirees who have a limited income, Reverse Mortgages are the preferred method for aged care finance. In some cases, where self-funded retirees have enough income to service a conventional mortgage, Seniors First will recommend a home or investment loan to finance aged care & accommodation.

A Reverse Mortgage loan may be a good solution for aged care finance if: