Understand aged care costs, your choices and how home equity may help Australian homeowners fund care while keeping control, security and peace of mind.
Aged care decisions rarely arrive at a convenient time. A fall, a hospital stay or the gradual realisation that daily tasks are becoming harder can quickly turn a family conversation into a financial one. For many older Australians, the priority is clear: receive the right support while protecting independence, dignity and the comfort of home.
The cost of care can feel daunting, particularly when much of your wealth is tied up in your property rather than sitting in the bank. Understanding the costs early gives you more choices and more time to make decisions without pressure.
Aged care is not one single service or one fixed price. The amount you may pay depends on the type of support you need, your income and assets, where you receive care, and the provider you choose.
Support delivered at home can include help with personal care, meals, cleaning, transport, nursing or modifications that make the home safer. Depending on your circumstances, government funding may contribute to approved services following an assessment. You may still be asked to make a contribution based on your financial position, and there can be out-of-pocket costs where the support you want is not fully covered.
Residential aged care has a different cost structure. If moving into care becomes necessary, you may encounter several separate charges. These can include a basic daily fee, a means-tested care fee and accommodation costs. Some homes also offer additional services for a higher fee.
Accommodation may be paid as a refundable accommodation deposit, often called a RAD, a daily accommodation payment, often called a DAP, or a combination of both. A RAD is generally paid as a lump sum and is refundable, less any agreed deductions. A DAP is paid regularly and is not refundable. The right approach depends on your available cash, other investments, the cost of borrowing and your wider plans for the family home.
Fee rules, thresholds and government support can change. Before committing to a care arrangement, it is sensible to obtain a current income and assets assessment and seek personalised financial advice.
The family home is often the biggest source of uncertainty. Many people assume they must sell it to pay for care. That is not always the case.
Whether your home is counted in an aged care means assessment depends on your circumstances. For example, its treatment may differ if a spouse or certain protected people continue to live there. There may also be limits on the value assessed. If nobody remains in the property and you move permanently into residential care, the position can change over time.
This is why a quick decision to sell can be costly. Your home may have emotional value, provide an option to return home if circumstances improve, or form part of your estate plans. On the other hand, retaining a vacant home involves rates, insurance, maintenance and possibly renovation costs. If it is rented, rental income and tax considerations need careful attention.
There is no universal answer. The best choice depends on your care needs, household situation, cash flow, pension position and the role your home plays in your long-term plans.
For homeowners aged 60 and over, home equity can offer another way to access funds without immediately selling or downsizing. A reverse mortgage is one option that allows eligible homeowners to borrow against part of their property’s value while retaining ownership and the right to live there, subject to meeting the loan conditions.
Funds may be taken as a lump sum, regular advances, a line of credit or a combination, depending on the product and lender. This flexibility can be useful where you need to pay a refundable accommodation deposit, fund home modifications, cover a period of in-home support, or supplement income while care arrangements are being organised.
Unlike a standard home loan, reverse mortgage repayments are generally not required while you live in the home. Interest and fees are added to the balance, which means the debt grows over time. The loan is usually repaid when the last borrower sells the property, moves permanently into residential care, or passes away.
That convenience comes with an important trade-off: the longer the loan runs, the more interest can compound and the less equity may remain later. It is worth modelling several scenarios, including what happens if you need care for longer than expected or property values grow more slowly than anticipated.
Australian reverse mortgages also have consumer protections. These include the no negative equity guarantee, meaning you or your estate will not owe more than the home is worth when it is sold. Lenders must also assess whether the loan is suitable and provide projections showing how the balance could increase over time. These protections matter, but they do not replace careful advice tailored to your circumstances.
For many people, the first goal is not residential care. It is staying safely in a familiar home with the right support around them. This can involve installing rails and ramps, altering a bathroom, arranging domestic help, paying for mobility equipment or increasing the hours of personal care.
These costs can build gradually rather than appearing as one large bill. Accessing a modest amount of equity may help create a practical buffer, so decisions about care are based on need rather than a temporary shortage of cash.
It is equally important not to borrow more than you need. A clear plan should identify the likely costs over the next one to three years, any government assistance available, regular living expenses and a contingency for unexpected health needs. Borrowing in stages, where available, can be more appropriate than taking a large lump sum that begins accruing interest immediately.
Aged care funding touches health, housing, family and finances. Take the time to ask direct questions and make sure the answers are in plain English.
Consider these practical issues before you proceed:
A lender can explain loan features and eligibility, but specialist aged care financial advice is particularly valuable when considering a move into residential care. An adviser can help you compare accommodation payment options, assess pension implications and understand how different choices affect your estate.
Margaret is 76, owns her home outright and receives the Age Pension. After a period in hospital, she wants to remain at home but needs bathroom modifications, a personal alarm and additional help each week. Her savings are limited, and she does not want to sell the house she has lived in for decades.
Rather than making rushed changes, Margaret obtains a care assessment, confirms her likely ongoing contributions and prepares a household budget. She then considers using a carefully sized home equity release facility to fund the modifications and establish a reserve for care expenses.
Before proceeding, she discusses the proposal with her children and seeks advice about the potential effect on her pension, future aged care costs and estate. The arrangement may suit her if it lets her remain safely at home and she understands the long-term cost. It may not suit someone planning to sell within a short period or someone with sufficient accessible savings.
The strongest aged care decisions are usually made before a crisis forces the issue. Start by understanding the support available, collecting realistic cost estimates and checking how your home is treated under the relevant means tests. Then consider whether savings, investments, family support, selling, renting or home equity can play a role.
You deserve care choices that respect the life you have built. With clear guidance and enough time to weigh the trade-offs, it is possible to plan for support while keeping control of what matters most to you.
