Reverse Mortgages for Aged Care and In-Home Care

Finding aged care funding can feel overwhelming for you and your family. Costs are complex, and retirement income often falls short. The good news? You can use your home equity to provide funding for aged care and in-home care costs. With a Household Loan, you can access the wealth in your home without needing to sell it.

For most Australian families, the home is their biggest asset, often more valuable than superannuation or savings. The Household Loan is a type of reverse mortgage that allows you to unlock some of this value, giving you the funds you need for quality care while maintaining independence and peace of mind.

Australia’s aged care system can be complex. Understanding the services and costs helps you make more informed decisions.

There are three main types of aged care services in Australia:

• Residential aged care involves moving into a care facility, where you receive 24-hour support if living at home is no longer safe. Facilities range from basic assistance to full nursing care.
• Respite care provides temporary support to give family carers a break. It can take place at home, in community centres, or in aged care facilities.
• In-home care allows you to remain in your own home with tailored support. Services can range from help with daily tasks to complex nursing care. Home care packages are available across four levels, depending on your needs: basic care, low level care, intermediate care and high-level care*1

There are several layers of cost with respect to aged care funding:

• Refundable Accommodation Deposits (RADs): large upfront payments for residential care rooms. These are fully refundable when the resident leaves or passes away.
• Daily Accommodation Payments (DAPs): ongoing daily payments that are an alternative to a lump sum RAD.
• Means-tested care fees: based on your income and assets, higher means lead to higher contributions.
• In-home care costs: covers package fees, additional services, equipment and home modifications.

The government provides help through My Aged Care, the entry point for aged care services. Your income and assets are assessed to determine how much support you are eligible to receive. While your home is considered in the means test, there are protections for your primary residence.

• Protected person exemption: If someone eligible continues living at home, your home may be fully exempt.
• Home exemption cap: If no one protected remains in the home, your home’s value is capped) for assessment

Government subsidies usually cover basic care needs, but you may still be responsible for accommodation and extra services. While your home is considered in the means test, there are protections in place for your primary residence.

For example, if a spouse or dependent is still living in the home, it won’t be counted as an asset for aged care purposes. This helps ensure your partner or family can remain in the home even if you move into care.

Understanding what the government pays for versus what you need to contribute helps you plan ahead and avoid unexpected costs.

Many Australians face challenges paying for aged care. The biggest issue is often the gap between retirement income and actual care costs

Aged care funding costs are increasing faster than retirement incomes such as the Age Pension or superannuation balances. This creates funding gaps, particularly for middle-income retirees who may not qualify for full government support but also lack sufficient liquid assets.

Care needs often increase over time, which means costs can rise beyond the initial assessment. Planning ahead on care needs may help reduce stress in the future.

Aged care funding decisions often place stress on families. Adult children may feel pressure to contribute financially or provide care, which can affect their own finances and careers.

These decisions are especially difficult when the family home is involved. Quick choices made during health crises can lead to long-term regret and family disagreements.

For most Australians, the family home is more than just an asset. It represents memories, comfort and security. Selling it to pay for care can feel like losing something irreplaceable.

Beyond the emotional impact, selling your home can mean:

• Losing a familiar environment
• Selling at an unfavourable time in the property market
• Reducing what your family may inherit
• Missing out on future property growth
• Displacement of other family members/resident in the home
• Complications when one partner needs care but the other still lives at home

Once sold, there is no going back, and your options for future housing may become limited.

The Household Loan offers an alternative to selling your home. It allows you to access the wealth in your home while maintaining full ownership and continuing to live there. If one partner needs to move into residential aged care, the other can remain at home and the loan continues. Once the last person has permanently moved into aged care, no repayments are required for five years. After that time, the loan will need to be repaid, usually from the sale of the property.

With a Household Loan, you can use some of your home equity for aged care funding. The amount available depends on your age, your home’s value and lender guidelines. Generally, older borrowers can access a larger proportion of their home’s value.

Unlike standard mortgages where you make repayments to build equity, the Household Loan lets you access the wealth you’ve already built over decades of ownership.

Household Loans can be tailored to suit different aged care funding needs:

• As an additional income stream to make DAP payments or fund in-home care;
• As a contingency fund to be drawn as required; or
• As a lump sum to pay a RAD, renovate your home for better mobility, or pay for health and care expenses.

This flexibility allows you to match your funding with your personal care requirements.

With the Household Loan, you retain the right to remain in your home for as long as you wish. In the situation where a homeowner moves into Residential Aged Care, any remaining partner or approved occupant can remain in the home as long as they wish. If it’s the last remaining resident who moves into Aged Care, the loan must be repaid after five years.

A Household Loan also comes with a no negative equity guarantee, meaning you’ll never owe more than your home is worth.

Most Australians prefer to stay in their own homes as they age. Ageing in place allows you to remain independent and connected to your community.

Planning for ageing in place includes preparing your home for changing mobility and health needs, as well as budgeting for in-home care and modifications. While staying home may seem less costly than residential care, it often requires significant investment that is not fully covered by government support.

The Household Loan can provide the financial flexibility to remain in your home while receiving the care you need.

In-home care often incurs costs that government packages don’t cover. With a Household Loan, you can fund:

• Home modifications (bathrooms, ramps, stairlifts)
• Private carers and additional services
• Medical equipment and technology to support independence

This helps you create a safe, supportive environment that allows you to continue living at home.

By using your home equity for aged care funding, you reduce pressure on family members to provide financial or unpaid care support. This allows your family to focus on emotional connection and support rather than financial strain.

Using your home equity through a Household Loan provides key benefits for age care funding.

Payments can be structured as lump sums, regular income, or a combination. You can also adjust how much you draw down as your needs change.

Unlike other loans, Household Loans don’t require regular repayments while you remain in your home. The loan is repaid when you sell your home, move permanently, or from your estate.

You remain the owner of your home, with the ability to benefit from future property value growth and adapt your home to your needs.

Other aged care funding options include downsizing, using savings or investments, and family contributions. Each has its own advantages and drawbacks that should be considered against your personal goals.

Choosing a Household Loan for aged care funding depends on your care needs, estate planning goals and personal priorities. Professional advice from financial, legal and aged care specialists is highly recommended.

If you’re exploring aged care funding options, start by understanding your likely care costs. Next, use the Household Wealth Calculator to estimate how much equity you may be able to access.

Household Capital’s specialists can explain how a Household Loan works, how much equity may be available, and what it means for your estate. With the right information and support, you can fund quality care while staying secure in your family home for as long as you live there, and still have options if you later move into residential aged care.

Speak with a Household Capital retirement funding specialist today to learn how you can Live Well At Home™.

References

1Australian Government Department of Health (https://www.health.gov.au/our-work/hcp/about/how-it-works)

[1] Moneysmart.gov.au – Reverse Mortgage Calculator
[2] Tonicmag.com.au – What is a Reverse Mortgage?
[3] Ratecity.com.au – Maximum Borrowing Amount for Reverse Mortgage
[4] The Australian – True Cost of a Reverse Mortgage Could Be a Lost Inheritance
[5] The Australian – Reverse Mortgages and Early Inheritance
[6] DSS.gov.au – Home Equity Access Scheme
[7] The Australian – Why Government’s Reverse Mortgage Makes Sense
[8] Superguide.com.au – Pension Loans Scheme Guide
[9] The Australian – Reverse Mortgage Lump Sum Rules
[10] The Australian – Growth in HEAS Participation
[11] DSS.gov.au – No Negative Equity Guarantee in HEAS