Aaron do you know which lenders provide reverse mortgages for aged care? Are the interest rates much higher than for a normal mortgage? What happens if you get to a situation where the house is worth less than the mortgage (say if interest rates rise and property values drop)? Who would be responsible for the debt?
Financing Aged Care
- Thread starter DreaLaLa
- Start date
DreaLaLa,
The way they structure these products is they usually guarantee that your debt can never be more than what the house is worth. So even if the house re-sale value is lower than the total debt, that shortfall is worn by the lender. So why would they lend you the money in this case? Well they have taken this risk into account in the higher interest rates that they charge.
The reason why allow this is because usually the house is sold when the borrower (i.e. the pensioner) dies. But you always have to double check this in the contract just to make sure.
The way they structure these products is they usually guarantee that your debt can never be more than what the house is worth. So even if the house re-sale value is lower than the total debt, that shortfall is worn by the lender. So why would they lend you the money in this case? Well they have taken this risk into account in the higher interest rates that they charge.
The reason why allow this is because usually the house is sold when the borrower (i.e. the pensioner) dies. But you always have to double check this in the contract just to make sure.
we went down this path for over a year before we put mum into care. It was good because she could stay at home, and at that stage was manageable. but it is very expensive. In the end, we couldnt afford it financially and she had deteriorated past where it was safe. But I'm glad we were able to delay the nursing home for a while at least.
We also looked at a reverse mortgage (which we were just about to get approved when she died). I think with ours, we could only borrow a maximum of 25% of the value of the house, which was more than we needed. But probably still wouldnt pay the full bond. We were going through BankWest.
I think daily fees in low care dementia specific are a set rate, which you get a concession on, depending upon your income/pension.
there still is a choice, no matter what size the bond is, to pay off the interest/ retention fee, on a monthly basis, and never pay the full $500K.... you just need to have the income to be able to do that.
I would ask the NH to let you know what the instalments would be, to see if its feasible. Not sure what the interest rate is at the moment, but when we entered, it was lower than the bank interest rates.
But you should also look around, because the bond charged by NH's varies greatly, often for no additional benefit in terms of the building itself. Even rooms in the same NH can be charged differently.
Thanks Penny. Really helpful! We will look into all of that. Can I ask how much it cost to keep your family member at home? That could be an option for now.
From what I'm reading the bond literally pays for the accommodation. Why doesn't it just work like rent? If we are renting out a large house in a good area that should more than cover the rent on a 1 bed room with ensuite my relative would be staying in - especially if the nursing home isn't in an up market area. Why do we have to pay a bond? Or pay them interest on the bond? It seems as though it completely erodes your capital if inflation and interest rates are high and they take a large deduction from it each year. Hopefully we can work the intallments out so the rental income will cover them.
From what I'm reading the bond literally pays for the accommodation. Why doesn't it just work like rent? If we are renting out a large house in a good area that should more than cover the rent on a 1 bed room with ensuite my relative would be staying in - especially if the nursing home isn't in an up market area. Why do we have to pay a bond? Or pay them interest on the bond? It seems as though it completely erodes your capital if inflation and interest rates are high and they take a large deduction from it each year. Hopefully we can work the intallments out so the rental income will cover them.
I know of one small lender only that would do it for age care...rate is like 9.5%- i personally haven't used them for this purpose tho.
But before you consider any reserve mortgage for your relovs ...they will def need to seek financial advice from a licensed financial planner; us brokers and bankers can not go ahead with reserves mortgage without the knowledge professional help as been correctly sought and explained etc...
A bit more details on Reverse mortgage and it's implications-
http://www.asic.gov.au/asic/asic.ns...+mortgage+calculator+for+seniors?openDocument
Lastly, there is a independent reserve mortgage industry body called SEQUAL ( Senior Australians Equity Release Association ) it's not compulsory for brokers and lenders to join..but it's suggested you find one that is SEQUAL approved to make sure your interest is looked after.
http://www.sequal.com.au/
Regards
Michael
There are Financial Planners who specialise in assisting this type of individual and the Reverse Mortgage is certainly the answer, however of prime importance is the structuring of this in the most cost efficient and beneficial manner. Proper advice from a Financial Planner who specialises in this area is a must to protect everyone.
We had carers in full time during the day (but mum was on her own during the evening and overnight). It cost over $1000/week. But there are some other options through ACAT, for in-home respite etc, which would cost less or be subsidised. Mum was very resistant to any help, so for us this more expensive option was the only one which worked.
the idea of the accommodation bond is to allow NH's to have enough money to make capital investments and build more rooms. So, its a bit different to rent. the daily rate covers your "rent" and care.
The bond amounts varies greatly between NH's, so you may be able to find one where the bond amount is not too high. The interest rate you pay and the retention fee are set by the government, so the only variable is the actual bond amount itself. (This is all related only to low care dementia specific facilities. High care NH work differently.)
We were in a different situation with a healthy 95 year old who took a massive stroke.
I then had to try and protect my mothers interests but that came to nothing
as Centre link and the aged care department basically takes over by way
of Assessments.
We did not have to pay for a bond as we were paying the full care amount.
I believe you only pay for a bond if you are on a government pension or part
pension and you still own your own home or some kind of wealth,no dependents.
In the end because my mother was a dependent the assessment ruled the
assets and wealth to be split 50/50 (PPOR mother)which still left plenty for my fathers care.
He ended up paying around $50,000 each year for his care in the best
nursing home we could find. An aged care facility can only make you
pay the maximum rate set by the government which is around the $800 per week mark,
this is the basic care and on top of that you pay for extra's.
I suppose what I'm saying you are wasting your time doing anything before
you have had the assessment done, you cannot just turn up to a nursing home
as you have to be assessed by the government aged care department first.
Its no good trying to orgainse financial matters until the assessment is applied first.
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There is so much advice on this thread, some completely opposite to each other.
We paid $500K bond and roughly $750 per week for my Dad (maximum daily rate - unsure exactly the amount). He never has and never will be entitled to any pension. The nursing home takes a certain amount out of that bond for each year, but that stops after (I think) five years. When Dad passes away, the remainder will pass to his estate.
From memory, I think the rent from his PPOR is not treated the same way as his rental income from his IPs. I cannot remember the details but these decisions need to be made with full knowledge and Centrelink is the place to start.
I suppose what I am trying to say is that you definitely need to see Centrelink who should know exactly what the position is. Also ACAT needs to assess the "patient".
I would advise an early assessment, so that at least the patient is "in the system". Further assessments can be done as he/she deteriorates.
Before Mum passed away suddenly, we had discussed the idea of having a night nurse sleep in to keep an eye on Dad. He tended to wander around the house at night, so Mum got woken up all through the night. A friend's grandmother paid about the same as we are paying for Dad's nursing home to have a nurse sleep over each night. Her grandmother had her faculties, however, and I don't think Dad would have understood who the stranger was.
It didn't matter anyway, because before we could arrange anything, Mum was diagnosed with a brain tumour and was gone within three months. Thankfully, Dad had been assessed by ACAT and they moved very quickly to find him a place in a nursing home due to the circumstances we found ourselves in. We could not deal with Dad whilst also dealing with Mum's situation.
Another tip... we paid around $1000 (or less) to have somebody do the paperwork and find a placement for Dad. We had so much happening with Mum that we handed it over. It was well worth the money - they found him a fantastic home, and we didn't have to deal with the searching and the red tape involved in finding him a place.
I certainly would not make any decisions based on information on this forum, no matter how well meant the advice is.
We paid $500K bond and roughly $750 per week for my Dad (maximum daily rate - unsure exactly the amount). He never has and never will be entitled to any pension. The nursing home takes a certain amount out of that bond for each year, but that stops after (I think) five years. When Dad passes away, the remainder will pass to his estate.
From memory, I think the rent from his PPOR is not treated the same way as his rental income from his IPs. I cannot remember the details but these decisions need to be made with full knowledge and Centrelink is the place to start.
I suppose what I am trying to say is that you definitely need to see Centrelink who should know exactly what the position is. Also ACAT needs to assess the "patient".
I would advise an early assessment, so that at least the patient is "in the system". Further assessments can be done as he/she deteriorates.
Before Mum passed away suddenly, we had discussed the idea of having a night nurse sleep in to keep an eye on Dad. He tended to wander around the house at night, so Mum got woken up all through the night. A friend's grandmother paid about the same as we are paying for Dad's nursing home to have a nurse sleep over each night. Her grandmother had her faculties, however, and I don't think Dad would have understood who the stranger was.
It didn't matter anyway, because before we could arrange anything, Mum was diagnosed with a brain tumour and was gone within three months. Thankfully, Dad had been assessed by ACAT and they moved very quickly to find him a place in a nursing home due to the circumstances we found ourselves in. We could not deal with Dad whilst also dealing with Mum's situation.
Another tip... we paid around $1000 (or less) to have somebody do the paperwork and find a placement for Dad. We had so much happening with Mum that we handed it over. It was well worth the money - they found him a fantastic home, and we didn't have to deal with the searching and the red tape involved in finding him a place.
I certainly would not make any decisions based on information on this forum, no matter how well meant the advice is.
go to a specialist financial advisor who only deals with centrelink and aged care. expect to pay around 2 grand for the advice and all paperwork including negotiation upwards or downswards of the bond
there are many scenarios, it really depends on a number of things which option you take
there are many scenarios, it really depends on a number of things which option you take
You can give yourself a headache
Funding for permanent residents starts on about page 93 of the Residential Care Manual 2009
http://www.health.gov.au/internet/main/publishing.nsf/content/ageing-manuals-rcm-rcmindx1.htm
My best information is to ring up and go and have a look at the facilities.
People have to help finance their own age care, we are all in the same boat and even though they may have to pay up an accomodation bond you do get some back.
When the time gets around to research a facility (my brother is looking after our mother who has dementia with flexible community care support) I am just going to ring up a few facilities and ask for an estimate.
Mum has X amount of cash and her house is worth about x amount how much will the charges be approximately.
Tip - may not apply in the city but locally the older the building the less the bond as they are competing with the newer built properties and it doesn't mean the care is any less.
Cheers
Sheryn
Funding for permanent residents starts on about page 93 of the Residential Care Manual 2009
http://www.health.gov.au/internet/main/publishing.nsf/content/ageing-manuals-rcm-rcmindx1.htm
My best information is to ring up and go and have a look at the facilities.
People have to help finance their own age care, we are all in the same boat and even though they may have to pay up an accomodation bond you do get some back.
When the time gets around to research a facility (my brother is looking after our mother who has dementia with flexible community care support) I am just going to ring up a few facilities and ask for an estimate.
Mum has X amount of cash and her house is worth about x amount how much will the charges be approximately.
Tip - may not apply in the city but locally the older the building the less the bond as they are competing with the newer built properties and it doesn't mean the care is any less.
Cheers
Sheryn
We’re going to see a Centrelink advisor, but we wouldn’t mind seeing a private one and comparing the advice. Can you recommend anyone? Could it be done via e-mail if there is someone interstate? If anyone can recommend a planner that specializes in this area it would be great.
We won't be basing our decisions solely on the information here so don't worry. We will be seeking professional advice too. But hearing of other people's experiences is still helpful.
Could you pass along the details of the business who found the placement for your dad?
I agree. But it seems that if we structure things in the wrong way we really could do some damage to our family member's finances. We want to make sure our relative gets the best care possible, but also that they don't lose everything they have worked so hard for their entire life!
The ladies who looked after us with finding Dad a placement were from Complete Aged Care Placement Solutions. We dealt with Kristine Fletcher and Ann (surname??). Numbers I have are 1300 188 698 and I think Kristine's mobile is 0435 119 988.
They did all the legwork, which we just couldn't do with what we were dealing with. They were fantastic.
They did all the legwork, which we just couldn't do with what we were dealing with. They were fantastic.
Hi
It was my impression that a bond is payable for those people in low care and for those in high care (whereby I understand dementia etc) there is no bond to pay.
My Mum was in ACAT certified high care (no dementia) as she just couldn't manage at home any more by herself and the costs of 24/7 home care were way beyond the combined means of my brother and myself.
My brother (bless him) went through all the websites available and one thing that stood out for me was: DO NOT SELL THE FAMILY HOME and if you did rent it out the rent money did not go toward the income of the mother (in whose name the house was).
Hope this helps.
annE
It was my impression that a bond is payable for those people in low care and for those in high care (whereby I understand dementia etc) there is no bond to pay.
My Mum was in ACAT certified high care (no dementia) as she just couldn't manage at home any more by herself and the costs of 24/7 home care were way beyond the combined means of my brother and myself.
My brother (bless him) went through all the websites available and one thing that stood out for me was: DO NOT SELL THE FAMILY HOME and if you did rent it out the rent money did not go toward the income of the mother (in whose name the house was).
Hope this helps.
annE
Hi
It was my impression that a bond is payable for those people in low care and for those in high care (whereby I understand dementia etc) there is no bond to pay.
annE
I think you are correct in terms of the bond for high care. I think there may be a means tested accommodation charge.
But usually those with dementia are in low care, dementia specific, unless there are significant nursing issues.
the ACAT assessment will determine which type of care is required.
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