Home Equity for Aged Care Costs: What You Need to Know

For many Australians over the age of 60, the family home is more than just bricks and mortar; it holds a lifetime of memories and is often the cornerstone of their financial legacy. It’s the place where children were raised, milestones were celebrated and a sense of security was built over decades. It’s also the place where not insubstantial amounts of money are accessible via home equity, which can be unlocked to fund aged care costs.

However, as we age, a new and often daunting chapter approaches: the transition into residential aged care. For many families, this milestone is clouded by a single, stressful question: "Do we have to sell the home to pay for the care?"

In the past, the answer was often a reluctant yes. The high cost of Refundable Accommodation Deposits (RADs) – which frequently exceed $1 million in metropolitan areas – often made selling the family home feel like the only viable path to securing a room in a quality facility.

But the financial landscape in 2026 has evolved. Today, your home can be more than just a place to live; it can be a significant financial resource. Through a reverse mortgage, a type of home equity loan, it is increasingly possible to unlock the wealth tied up in your home without having to hang a for sale sign on the front gate.

Whether you are looking to fund a lump-sum RAD or cover ongoing daily fees, understanding how to access and use your home equity is essential. This article explains the alternatives to selling the home, helping you hold onto your property assets while ensuring you or your loved ones receive the high-standard care you deserve.

Navigating the aged care system can often feel like learning a new language. To understand where home equity may fit in the puzzle, you need to understand what payments you may need to make.

Residential aged care costs are generally split into two categories: the room itself and the care received. The ‘price tag’ for a room is known as the Accommodation Payment. You generally have three choices in how to settle this:

• Refundable Accommodation Deposit (RAD) – this is a lump-sum payment. This works like an interest-free loan to the aged care facility. The balance is refunded to you or your estate when you leave. Changes introduced on 1 November 2025 allow providers to retain up to 2% of the RAD per year for a maximum of five years – up to 10% total. The remaining balance is guaranteed by the government. Note: these changes only apply to residents who enter care after 1 November 2025.
• Daily Accommodation Payment (DAP) – a non-refundable ‘rental’ style payment. If you choose not to pay a lump sum, the facility charges interest on the unpaid RAD amount. Note: there is a second daily payment, the Daily Accommodation Contribution (DAC). This payment relates to when the government helps with the costs; the amount is determined by Services Australia based on the individual’s means assessment.
• A Combination – you can pay a smaller lump sum (RAD) and a partial daily fee (DAP).

The government’s website My Aged Care provides more information about aged care costs and how they are calculated.

The financial side of residential aged care is more than simply buying a room. Once you’ve moved in, there are ongoing costs for the care and services received each day. Under the major reforms that rolled out in November 2025, the government has restructured these fees to be more transparent, but also more dependent on your personal wealth. There are five care components you need to plan for.

1. The basic daily fee – every resident, regardless of their financial situation, pays the basic daily fee. It covers meals, cleaning, laundry, heating and cooling. In 2026, it is set at $66.80 per day (approximately $24,382 per year). This fee is indexed twice a year and is strictly capped at 85% of the single Age Pension. It is designed to cover the basic living costs you would have had while living at home.
2. The non-clinical care contribution (new for 2026) – this is a significant change from the previous means-tested care fee. If you enter care after 1 November 2025, you contribute specifically to ‘living well’ services, such as help with showering and dressing, or lifestyle activities. The cost is means-tested. Depending on your income and assets – including your home's capped value – you could pay up to $107.32 per day. This fee is subject to a lifetime cap, currently around $130,000. Once this amount has been paid over the course of your time in care, the government takes over the full cost.
3. The ‘hotelling’ contribution – a supplementary fee for everyday living expenses that go beyond the basic essentials. For those residents assessed as having the financial capacity after their means test, this contribution is capped at approximately $22.15 per day (about $8,084 per year).
4. Clinical care – a positive change arising from the recent reform is the treatment of clinical health costs. Medical care, nursing and allied health such as physiotherapy are now fully government-funded for every resident. In the past, high-needs residents often faced high means-tested fees.
5. Extra service fees – some residential aged care facilities offer ‘premium’ services that fall outside the standard government-regulated fees. These may include streaming services, wine with meals or an on-site hairdresser. Costs are negotiated directly with the provider and can range from $10 to $100+ per day. Unlike the other fees, these are optional and do not count toward lifetime caps.

When you add up these fees, ongoing care costs could easily exceed $50,000 a year…all this on top of the RAD!

Using home equity can be a strategic alternative to selling the family home. A reverse mortgage allows you to borrow a portion of your home’s value without the requirement of making regular monthly repayments. A reverse mortgage calculator can easily demonstrate the value of home equity available to you to cover aged care costs.

Instead, the interest capitalises (adds to the loan balance) over time. Interest rates and fees vary between lenders. The total loan, including interest, is typically repaid when the home is eventually sold or the estate is settled. In the case of aged care funding, the borrower has a five-year period before needing to sell the home – this is designed to bridge the gap between moving into care and the ultimate transition of the property.

Of course, if a partner or spouse is still living in the home, there is no fixed term to sell the home and repay the loan. This is perhaps the most significant emotional and practical benefit of leveraging home equity – it protects the ‘left-behind’ spouse.

When one partner requires residential aged care while the other is still capable of living independently, selling the family home to fund a RAD or DAP can be a logistical and financial nightmare. If the house is sold to pay for one partner’s care, the other is suddenly left displaced, searching for a new, smaller residence while trying to maintain their own sense of security, community and income.

By using a home equity loan, the partner remaining at home doesn't just keep their roof over their head; they keep their life as is. There is no fixed term to sell the property or repay the loan as long as one of you still resides there. This strategy ensures that the partner at home maintains their independence and stability, while the partner in care gets the support they need – all without forcing a move that neither of you is ready for.

Applications for credit are subject to eligibility and lending criteria. Fees and charges are payable, and terms and conditions apply (available upon request). Household Capital Pty Limited ACN 618 068 214, Australian Credit Licence 545906, is the Servicer for the credit provider Household Capital Services Pty Limited ACN 625 860 764.