Aged care reverse mortgage: fund care without selling your home
Residential aged care costs are confronting. Refundable Accommodation Deposits can exceed $500,000, and ongoing fees add thousands each month. These decisions land on your family during one of the hardest periods of life, often with weeks to act. An aged care reverse mortgage lets asset-rich, income-constrained retirees access home equity to cover care costs without forcing a sale. We compare options across 40+ lenders and will tell you honestly if a [reverse mortgage](/services/reverse-mortgage) is not the right fit for your situation.
Aged care costs compared: paying the RAD upfront vs ongoing DAPs
An aged care reverse mortgage makes more sense once you see the numbers side by side. Here is how the two main payment structures compare.
A Refundable Accommodation Deposit (RAD) is a lump sum you pay upfront to the care home. It is held during the resident's stay and refunded to the estate when they leave care. A Daily Accommodation Payment (DAP) is the alternative: you pay a daily fee calculated using the Maximum Permissible Interest Rate (MPIR), currently around 8.36% per annum.
Worked example: $500,000 RAD
Assume a reverse mortgage rate of 8.50% per annum, compounding monthly.
| Duration | Reverse mortgage cost | DAP total paid |
|---|---|---|
| 3 years | ~$143,000 interest | ~$125,400 (non-refundable) |
| 4 years | ~$200,000 interest | ~$167,200 (non-refundable) |
| 5 years | ~$264,000 interest | ~$209,000 (non-refundable) |
The critical difference: if you pay the RAD via a reverse mortgage lump sum, the $500,000 deposit is refunded to the estate when the resident leaves care. With DAPs, every dollar paid is gone.
Over a 4-year stay, the DAP path costs $167,200 with nothing returned. The reverse mortgage path costs $200,000 in interest, but the $500,000 RAD comes back. The net position favours the lump sum by roughly $467,000.
One protection is built into every regulated reverse mortgage in Australia: the No Negative Equity Guarantee. As Moneysmart (ASIC) confirms, you can never owe more than your home is worth. The lender absorbs the shortfall.
This example is illustrative, not financial advice. Your RAD amount, interest rate, and length of stay will differ.
Funding ongoing care fees with a reverse mortgage line of credit
Not every family wants or needs a lump sum. When a parent moves into a nursing home and the costs are ongoing, a reverse mortgage line of credit offers a different structure.
Instead of drawing the full amount at once, you access funds as needed. Interest accrues only on the amount you have drawn, not the full approved limit. In the early months, this keeps costs noticeably lower than a lump-sum approach.
You can also combine both structures. A partial RAD reduces the daily accommodation payment, and a line of credit covers the remaining DAP plus ongoing fees.
Timing matters. The RAD payment deadline is 28 days from entry into care. Our process is designed to move quickly when it matters, and lump-sum drawdowns can be structured to align with that 28-day window.
For a fuller picture of how reverse mortgages work, including the mechanics of drawdown facilities, we have a dedicated guide.
Can you get a reverse mortgage on a retirement village?
Eligibility for an aged care reverse mortgage depends on more than age and equity. The property itself matters, and so does the intended use. Knowing the rules now saves you time and stress later.
Retirement village title structures
Can you get a reverse mortgage on a retirement village unit? It depends on the title. Strata title units in retirement villages are accepted by most lenders. Licence and lease arrangements, which are common in many villages, do not qualify because the resident does not hold title to the property. This is not a reflection of your situation's merit. It is a lender requirement tied to how the property is registered. We can confirm your specific property's [reverse mortgage eligibility](/services/reverse-mortgage/eligibility) in a free consultation.
Home modifications for ageing in place
A reverse mortgage can fund modifications that allow someone to stay at home longer: grab rails, bathroom renovations, stairlifts, and ramp installations. For many families, delaying or avoiding residential care entirely is the preferred outcome. The cost of home modifications is a fraction of a RAD, and the person stays in familiar surroundings. This is worth exploring before committing to a care home placement.
Medical and living expenses
As Moneysmart (ASIC) confirms, home modifications, medical expenses, and living costs are recognised use cases for home equity release products. A reverse mortgage can cover in-home nursing, specialist appointments, mobility equipment, and day-to-day living costs alongside or instead of residential care funding.
What happens to a reverse mortgage and nursing home placement
This is the question that causes the most anxiety. When a parent moves permanently into a nursing home, what happens to the reverse mortgage and the family home? The answer is more structured and more protected than most families expect.
A reverse mortgage and nursing home placement do intersect, but the process follows clear steps with built-in safeguards.
01
The trigger event
When the borrower permanently vacates the property to enter residential aged care, the lender is notified. This is a trigger event under the loan terms. It does not mean immediate repayment. It starts a defined process with a clear timeline.
02
The repayment timeline
The family has 12 months to sell the property and repay the loan. This window gives you time to prepare the home for sale, choose an agent, and wait for a fair price. There is no forced auction. No panic sale.
03
The No Negative Equity Guarantee in practice
If the home sells for less than the outstanding loan balance, the borrower and the estate are not liable for the shortfall. The lender absorbs the loss. This scenario is rare, but the protection is absolute for regulated reverse mortgages in Australia.
04
What the estate receives
Any equity remaining after the loan is repaid belongs to the estate. If the RAD was paid via lump sum, that deposit is also refunded by the care home and returns to the estate. For more detail on estate outcomes, read our guide on [what happens to a reverse mortgage when you die](/blog/what-happens-reverse-mortgage-when-you-die).
05
Where Stryve fits in
We help families understand every one of these steps before they commit, not after. Our digital-first process handles the paperwork, and our team is available by phone when you need a human voice. Our role does not end at settlement.
Home Equity Access Scheme vs private reverse mortgage for aged care
The government's [Home Equity Access Scheme](/services/reverse-mortgage/home-equity-access-scheme) (HEAS) and private reverse mortgages both release home equity, but they work differently. Choosing the wrong one costs families thousands. As Services Australia confirms, the HEAS rate is 3.95% per annum (compound), but the scheme does not provide lump-sum payments. If you need to pay a RAD, HEAS cannot help. Private reverse mortgages charge higher rates (around 7.5% to 9.5%) but offer lump-sum access, which is essential for RAD payments. When HEAS is better: you need ongoing income supplements and the lower rate saves money over a multi-year period. When a private aged care reverse mortgage is better: you need a lump sum for a RAD payment, or you need flexible drawdowns that exceed HEAS limits. We disclose exactly how we are paid on every recommendation. The consultation is free, carries no obligation, and we will tell you if HEAS is the better path for your family. The borrower must still own the property, and it must be their primary residence or recently vacated for care. Full details are on our [eligibility page](/services/reverse-mortgage/eligibility).
| Services | Home Equity Access Scheme (HEAS) | Private reverse mortgage |
|---|---|---|
| Interest rate | ||
| Lump-sum payment available | ||
| Ongoing drawdowns available | ||
| Suitable for RAD payment | ||
| Minimum age (Age Pension age vs 60+) | ||
| No Negative Equity Guarantee | ||
| Flexible repayment options | ||
| Wide range of property types accepted |
Frequently asked questions about aged care and reverse mortgages
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