The vast majority of ageing Aussies want to stay in their own homes for as long as they can.
While there are more options and support available to allow you to age in place, the cost of care across the board is increasing.
Figuring out how to pay for both short and long-term aged care can be daunting for individuals and families – not to mention stressful!
If you do want to remain at home, the queue for government home care packages is long – with some 130,000 on the waiting list and approval times that may exceed 12 months – and depending on your individual needs, the amount received might not be enough.
Pulling together the money required for a Refundable Accommodation Deposit (anywhere between $300,000 and $500,000 and above) or having the funds available to pay a Daily Accommodation Payment (DAP) that exceeds the Age Pension is also extremely challenging, and generally beyond the means of most people – without somehow tapping into their available assets.
Selling the family home to fund aged care is not the only option and may negatively impact on the amount of Age Pension you receive.
If you own, or mostly own your home, you can use some of its accumulated value (equity) to pay for your aged care needs, without having to sell up and move.
There are a range of equity release products specifically designed for seniors (i.e. reverse mortgages) which allow you to fund your aged care needs, including:
- Regular payments to fund care within the home – while you wait for your government home care package to be approved OR to top up your current package, so you can engage a higher level of care for you or your partner.
- Lump sums to pay for your Refundable Accommodation Deposit (RAD) – driving down your DAP.
- Capital to undertake home renovations and modifications.
Funds to pay for mobility equipment or improved security and surveillance.
- A combination of the above.
All products allow you to remain in the family home (until it is sold) and some allow you to rent the home out and keep the income (note: this may impact on your Age Pension).
In all cases, no regular repayments need to be made with the facility or loan to be settled and paid out only when the home is eventually sold.
You do need to be aware that using some of your home equity in this way will reduce the amount of equity you hold in your home over time.
When considering whether to use some of your home equity to fund aged care, it is prudent and often a requirement of many providers to seek independent financial advice and guidance. In many cases, independent legal sign off is also required.
There are many benefits including, that you:
- Continue to own and live in your home and community.
- Remain independent and in control of your lifestyle.
- Can choose the level of care and provider.
- Have the flexibility to change your mind at any time.
Equity release is a specialist area and all the products, including the reverse mortgages, have different features and varying applications. While there is some good information available on ASIC’s MoneySmart website and others such as Canstar, understanding which product is the best for your situation and needs is difficult, and the services of a qualified professional experienced in equity release and retirement income planning is recommended.
Smooth Retirement Pty Ltd is an independent service providing expert guidance in equity release and retirement income planning Australia-wide. ABN: 46 619 010 445; AFSL 510015; Australian Credit Licence: 510015; smoothretirement.com.au; firstname.lastname@example.org; 1300 510 015.