Later life loans!

It’s probably your aspiration in life to go into retirement care free and debt free.At this stage in life you won’t have that regular pay cheque anymore and will have to rely on the government pension, maybe some super pension or savings to pursue those 1001 things you’ve always wanted to do. The last thing you would want is to go into debt again having spent most of your working life paying it all off.

Enter stage left – aged care.

Let’s say you’re 85 and a widow. You own your own home outright, have some savings and shares and receive an age pension. Your frailty now means you may have to consider entering an aged care facility. The facility requires you to pay a Refundable Accommodation Deposit of $400,000 (RAD). How are you going to pay it?

Here are some options:

  1. Sell your house and pay the RAD from the proceeds
  2. Don’t pay a RAD and pay a DAP (Daily Accommodation Payment) instead
  3. Get your kids to lend you the money

They all require you to spend your money or go into hock with your kids – sound appealing?

If not, a new product is now entering the market to finance your age care – the aged care loan. Yes, you can borrow that $400,000 to pay the RAD. Here’s how the product generally works:

  • The financier may lend up to 50% of the value of your home secured by a mortgage on your home
  • The term of loan is usually about 7 years or until you ‘leave’ the aged care facility
  • No capital or interest repayments required till then

Sounds simple doesn’t it. It is similar in many ways to the ‘reverse mortgage’ product that has fallen out of favour to some extent over recent times.

Far be it for me to say it is a good idea.  Still, it goes to show you that the tentacles and demands of aged care are now even stimulating the private finance market. But, as they say for any risky adventure – don’t try this at home (unless you get good advice) – der!

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