Funding an Aged Care Refundable Accommodation Deposit (RAD) with a reverse mortgage


Sumar Ambreen

A Refundable Accommodation Deposit (RAD) payable on entry in aged care is often a large amount of money to find in a hurry and many people think selling the family home is the only option open to them.

Selling off the much-loved home can be a distressing outcome for most people. However, in many cases the house can be retained by using a reverse mortgage loan to fund Aged Care entry costs.

Top 3 things to consider when funding a RAD with a reverse mortgage:

  • There is a maximum five years’ term for aged care reverse mortgages
  • You will need CentreLink clarification on whether the reverse mortgage proceeds adversely affect Age Pension and other Government benefits.
  • All aged care applicants also need to complete the Combined Assets and Income Assessment Form (SA457) provided by Department of Human Services.

What is a reverse mortgage?

It will allow you to borrow against the equity in your home, without having to sell, by releasing funds for comfortable years ahead in retirement.

It is a loan available to homeowners, 60 years or older, which allows them to convert part of the equity in their home into cash.

Can be taken against the family home as well as investment properties.

If you have already paid off your mortgage, you may benefit from taking a reverse mortgage to access funds to shoulder some retirement expenses such as aged care, home renovation, debt consolidation and more, while continuing to have full ownership of your home.

At the same time, you can keep accumulating equity in your home as property prices rise and avoid many of the costs associated with downsizing, such as real estate fees, moving costs and stamp duty.

The loan can be drawn down as a lump sum, regular income plan or a line of credit, so you have flexible options depending on your circumstances. One of the additional benefits of a reverse mortgage is that you can stay in your home for as long as you choose.

Safeguard you and your property by choosing the right reverse mortgage

  • Look for loans that will allow you to draw funds as and when needed rather than all upfront
    Ownership of your home stays with you
  • Protect the amount of equity left in your home at the end of the reverse mortgage (most people have chosen up to 50% of home equity protected and thus available to the estate)
  • Repayments are not required, however, you can make payments big or small at any time and be able to redraw
  • Ensure you receive independent legal advice
  • Ensure you receive independent financial advice
  • Involve the family and other beneficiaries in the decision

By Ambreen Sumar, Lending Specialist

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