The Federal Government supports the use of equity release products, such as reverse mortgages, to enable retirees to pay for future needs, such as aged care, thanks to a recent retirement income review.
Reverse mortgages can be a common practice in the aged care sector, but can also be quite confusing, leaving people wondering how exactly reverse mortgages work and how they can use them to fund aged care.
Australian reverse mortgage provider, Heartland, says that the whole process can be simplified by engaging an expert and utilising Heartland's Aged Care Option service.
"Making the decision to move into residential aged care can be overwhelming for families, and the costs involved can be high," explains Sharon Yardley, Head of Operations at Heartland.
"You may think selling the family home is the only option to pay for aged care fees, but there are alternatives that allow you to keep the family home, such as using a reverse mortgage."
Ms Yardley adds that one of the benefits of a reverse mortgage, compared to other forms of finance, is that regular loan repayments aren't required.
Heartland is a specialist provider of aged care reverse mortgages in Australia, and they have an Aged Care Option that is designed to assist with paying fees, such as the Refundable Accommodation Deposit (RAD) or the Daily Accommodation Payment (DAP).
The Heartland Aged Care Option has a 5 year loan term, where the interest is added to the loan monthly and repaid from the future sale of the property or after you pass away. You can also make voluntary loan repayments at any time.
Ms Yardley says, "Paying for these fees without having to sell the family home results in a number of potential financial and emotional benefits, including being able to return home, making care decisions less stressful."
The Heartland Aged Care Option could allow you to borrow up to 50 percent of the value of your home, this amount is dependent on age, to pay for aged care fees.
These funds can be drawdown on in a variety of ways:
An initial advance, a lump sum payment for immediate aged care costs
A regular advance with monthly, quarterly, or annual payments, to pay for ongoing aged care fees, for up to 5 years
A cash reserve (like a ‘line of credit’), for unexpected, or one-off, expenses such as medical bills
A combination of all three
"Our Aged Care Option could help families solve aged care funding requirements. Financially, it allows homeowners to sell the home when they are ready, which does not necessarily coincide with when aged care is required, providing additional peace of mind," says Ms Yardley.
In addition to the Aged Care Option, Heartland’s Standard Reverse Mortgage is also available for those that wish to receive in-home care, or when one member of a couple is still living in the family home.
With a Standard Reverse Mortgage, funds can be drawn solely in the form of regular payments, for up to 10 years, to help pay home care providers and continue living at home.
The initial advance and cash reserve drawdown options are also available, and there is no set loan term for a Standard Reverse Mortgage. Funds can even be used for purposes such as home improvements, upgrading transport, debt consolidation, and much more.
Every situation is different - this information has been prepared without taking into account your needs, objectives, or financial situation. If you are considering a reverse mortgage, we encourage you to understand how it may affect your personal circumstances - talk to friends and family, speak to professionals, and use the resources and tools Heartland has available.
Loans are subject to loan approval criteria. Terms, conditions, fees and charges apply. Credit provided by ASF Custodians Pty Ltd (ACN 106 822 780 / Australian Credit Licence No. 386781).
Heartland is Australia’s leading reverse mortgage provider. Established in 2004, they have helped over 21,000 people aged 60 and over release the equity from their homes, helping them to live a more comfortable retirement with independence and dignity.
Our award-winning, market leading product is supported by expert, personalised service, making Heartland the reverse mortgage lender of choice for many Australians.
Heartland is dedicated to doing the right thing when it comes to providing reverse mortgage options that work for different needs in retirement. Whether your preference is to age in place, or a residential aged care facility, their flexible options can be tailored to suit your individual needs.