Ask Paul: Mum's in aged care, can we keep the family home?
Sarla wants to help fund her mother's aged care without losing the family home. Faced with a $650 weekly gap, she asks Paul Clitheroe whether a reverse mortgage could provide the answer.
Reader question
My mum has recently gone into aged care.
She and I are pensioners. Because she has her house, the care costs are about $1200 per week.
After her pension it means I need to find about $650 per week. I'm a solo, mature mum and trying to keep the house for future security.
I've engaged a mortgage broker and a bank to discuss the possibility of a mortgage or reverse mortgage to get a lump sum to put in the refundable accommodation deposit (RAD), to drop the weekly costs.
I think there are house title issues and so forth, but would be grateful for any advice. - Sarla
Paul's response
This is a tricky one, Sarla, $650 a week is a lot to find.
But I do agree with your desire to keep your mum's home and I am sure she would want that for you.
I don't know the value of the home, which is a critical fact. Here you absolutely need advice from an aged care expert adviser, but I can make some general points.
If the house has a high value, it may be possible to sell it, purchase a smaller home in your mum's name, and reduce the RAD that you mention. Here is where the need for professional, personal advice comes in.
The RAD is not an assessable asset for the age pension, but an adviser will consider all your mum's assets.
One thing I think is for sure, which may not be mentioned by a bank or mortgage broker as there no fees for them, that the best reverse mortgage around available to pensioners is the Australian government's Home Equity Access Scheme.
You can find out how much you can get as a lump sum, a regular income payment or a mix of both at myGov. Please take a look.
Commercial rates on a reverse mortgage will be about 8.6%. The Home Equity Access Scheme is 3.9%.
I always recommend, even with a government reverse mortgage, that you seek independent advice, but it is pretty easy to choose 3.9% borrowing cost over nearly 9%.
I do believe you will be able to find a logical way to fund your mum's $650 a week without having to sell her home.
I agree, it is a real way to help your future financial independence. I'd encourage you to take a close look at the government's Home Equity Access Scheme.
On the face of it, it may be a solution to funding the $650 a week shortfall that you have to support your mum.
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