Aged Care Doesn't Have to Mean Selling the Family Home

Home Equity for Aged Care Costs: What You Need to Know

For many Australians over the age of 60, the family home is more than just bricks and mortar; it holds a lifetime of memories and is often the cornerstone of their financial legacy. It’s the place where children were raised, milestones were celebrated and a sense of security was built over decades. It’s also the place where not insubstantial amounts of money are accessible via home equity, which can be unlocked to fund aged care costs.

As your clients age, a new and often daunting chapter approaches: the transition into residential aged care. For many families, this milestone is clouded by a single, stressful question: "Do we have to sell the home to pay for the care?"

In the past, the answer was often a reluctant yes. The high cost of Refundable Accommodation Deposits (RADs) – which frequently exceed $1 million in metropolitan areas – often made selling the family home feel like the only viable path to securing a room in a quality facility.

But the financial landscape in 2026 has evolved. Today, your clients’ home can be more than just a place to live; it can be a significant financial resource. Through a reverse mortgage, it is increasingly possible for clients to unlock the wealth tied up in their home without having to hang a for sale sign on the front gate.

Whether your client is looking to fund a lump-sum RAD or cover ongoing daily fees, understanding how to access and use home equity to fund aged care is essential. This article explains the alternatives to selling the home, helping your clients hold onto their property assets and fund the move to aged care.

Understanding the aged care financial landscape in 2026

Navigating the aged care system can often feel like learning a new language. To understand where home equity may fit in the puzzle, it’s handy to understand the payments your clients will be considering.

Residential aged care costs are generally split into two categories: the room itself and the care received. The ‘price tag’ for a room is known as the Accommodation Payment and there’s generally three choices as to how this is settled:

• Refundable Accommodation Deposit (RAD) – this is a lump-sum payment. This works like an interest-free loan to the aged care facility. The balance is refunded to your client or their estate when they leave the facility. Changes introduced on 1 November 2025 allow providers to retain up to 2% of the RAD per year for a maximum of five years – up to 10% in total. The remaining balance is guaranteed by the government. Note: these changes only apply to residents who enter care after 1 November 2025.
• Daily Accommodation Payment (DAP) – a non-refundable ‘rental’ style payment. If your client elects not to pay a lump sum, the facility charges interest on the unpaid RAD amount.
  
  Note: there is a second daily payment, the Daily Accommodation Contribution (DAC). This payment relates to when the government helps with the costs; the amount is determined by Services Australia based on the individual’s means assessment.
• A Combination – your client can pay a smaller lump sum (RAD) and a partial daily fee (DAP).
  
  The government’s website My Aged Care provides more information about aged care costs and how they are calculated.
  
  The financial side of residential aged care is more than simply buying a room. Once your client has moved in, there are ongoing costs for the care and services received each day. Under the major reforms that rolled out in November 2025, the government has restructured these fees to be more transparent, but also more dependent on your client’s personal wealth. There are five care components clients need to plan for.
  
  
  1. The basic daily fee – every resident, regardless of their financial situation, pays the basic daily fee. It covers meals, cleaning, laundry, heating and cooling. In 2026, it is set at $66.80 per day (approximately $24,382 per year). This fee is indexed twice a year and is strictly capped at 85% of the single Age Pension. It is designed to cover the basic living costs one would have had while living at home.
  2. The non-clinical care contribution (new for 2026) – this is a significant change from the previous means-tested care fee. If a client enters care after 1 November 2025, they contribute specifically to ‘living well’ services, such as help with showering and dressing, or lifestyle activities. The cost is means-tested. Depending on your clients’ income and assets – including their home's capped value – they could pay up to $107.32 per day. This fee is subject to a lifetime cap, currently around $130,000. Once this amount has been paid over the course of the client’s time in care, the government takes over the full cost.
  3. The ‘hotelling’ contribution – a supplementary fee for everyday living expenses that go beyond the basic essentials. For those residents assessed as having the financial capacity after their means test, this contribution is capped at approximately $22.15 per day (about $8,084 per year).
  4. Clinical care – a positive change arising from the recent reform is the treatment of clinical health costs. Medical care, nursing and allied health such as physiotherapy are now fully government-funded for every resident. In the past, high-needs residents often faced high means-tested fees.
  5. Extra service fees – some residential aged care facilities offer ‘premium’ services that fall outside the standard government-regulated fees. These may include streaming services, wine with meals or an on-site hairdresser. Costs are negotiated directly with the provider and can range from $10 to $100+ per day. Unlike the other fees, these are optional and do not count toward lifetime caps.

When you add up these fees, ongoing care costs could easily exceed $50,000 a year…all this on top of the RAD!

Using home equity to pay aged care costs

Using home equity can be a strategic alternative to selling the family home. A reverse mortgage allows your clients to borrow a portion of their home’s value without the requirement to make regular monthly repayments.

The total loan, including interest, is typically repaid when the home is eventually sold or the estate is settled. In the case of aged care funding, the borrower has a five-year period before needing to sell the home – this is designed to bridge the gap between moving into care and the ultimate transition of the property.

Of course, if a partner or spouse is still living in the home, there is no fixed term to sell the home and repay the loan. This is perhaps the most significant emotional and practical benefit of leveraging home equity – it protects the ‘left-behind’ spouse.

When one partner requires residential aged care while the other is still capable of living independently, selling the family home to fund a RAD or DAP can be a logistical and financial nightmare. If the house is sold to pay for one partner’s care, the other is suddenly left displaced, searching for a new, smaller residence while trying to maintain their own sense of security, community and income.

By using a reverse mortgage, the partner remaining at home doesn't just keep their roof over their head; they keep their life as is. There is no fixed term to sell the property or repay the loan as long as one title holder still resides there. This strategy ensures that the client at home maintains their independence and stability, while the partner in care gets the support they need – all without forcing a move that neither is ready for.

Aged care funding and Powers of Attorney

When using home equity When using home equity to fund aged care, borrowers can elect to borrow either a lump sum to pay the RAD, or alternatively, set up a regular income stream to pay the DAP.

In addition, borrowers can request funds for ongoing core property expenses or any home maintenance that may be required.

Loans for aged care purposes are typically, but not always, applied for via an Enduring Power of Attorney (EPOA). While different lenders may have different policies, Connective Reverse has the following requirements for applications signed under EPOA or an administration/guardianship order. In short, such applications will be considered under the following circumstances:

• The primary purpose of the loan is to fund a DAP, and/or RAD, as well as other care related aged care needs.
• Where the EPOA is held by a spouse, funding is typically restricted to benefiting the donor (the client who has given their attorney powers) only. Other use of funds not benefiting the donor will be reviewed on a case by case basis.
• If EPOA is held by other family members or a third party, the loan purposes must benefit the donor in their entirety.
• Connective Reverse will require that the EPOA is registered with the Land Titles Office in each state (all states except Victoria).
• In Victoria, Connective Reverse will require a certified copy of the EPOA document.

Most lenders, including Connective Reverse, will require evidence that the Donor has lost capacity in order to accept an application under EPOA. Typically, this is in the form of a letter from a medical doctor which includes the practice letterhead, registration number and signature.

Client scenario one: Funding in-home support

A broker in NSW approached his Connective Reverse BDM with a scenario involving a client referred from an aged care adviser. The client was a self-funded retiree who wished to remain living in her home while receiving ongoing aged care services.

The client, Magda (aged 75), had been funding her health and aged care needs by drawing on her Self Managed Super Fund (SMSF) assets. However, after discussions with her aged care adviser, she recognised this was not sustainable – her retirement income was at risk.

A more sustainable long-term funding solution was required, one that established a structure that would allow Magda to comfortably fund substantial in-home care while preserving her broader investment assets.

Magda’s financial snapshot was as follows:

• Primary residence value: $5.2 million
• Additional assets: SMSF valued at $750,000 and some cash at bank

The challenge

Magda required significant ongoing care and support. At the same time, she had a strong desire to remain living independently in her home.

The solution

Working with Connective Reverse, the broker established a reverse mortgage. Through this facility, Magda was able to draw:

• $10,000 per month to fund ongoing in-home care
• A200,000 contingency reserve for unexpected medical or care expenses

This provided a structure that allowed Magda to remain living comfortably in her home, to receive the support she required and preserve the retirement income received via her SMSF.

Case study two: Resolving aged care arrears under EPOA

A broker was approached with a complex scenario involving a client referred via a financial planner. The client was a self-funded retiree already residing in permanent residential care, and was facing significant financial and legal pressure due to mounting care costs.

The client, Susan (aged 81), had been a resident at an Aged Care facility since late 2021. While she retained mental capacity, her transition into care was complicated by an NCAT administration and financial management order, originally imposed due to a sharp decline in her physical health and a change in her partner’s ability to provide care.

By 2025, a critical issue had emerged: because Susan had been in permanent care for over two years, her former family home was no longer exempt from the aged care assets test. As a self-funded retiree, this change in asset status led to the loss of pension entitlements and a spike in means-tested fees. With no immediate liquidity to pay these costs, significant arrears accrued, leading the care facility to place a caveat on her home to recoup the debt.

A sustainable solution was required to clear the legal encumbrance on the property and provide a reliable cash flow to fund her ongoing permanent care.

Susan’s financial snapshot was as follows:

• Primary residence: Former family home (subject to a provider caveat)
• Status: Self-funded retiree
• Legal Status: Financial Management Order revoked (Dec 2025); Enduring Power of Attorney (EPOA) established and active.

The challenge

Susan’s niece, acting as her EPOA, needed to urgently settle $180,000 in overdue aged care fees to remove the caveat on the property. Additionally, a guaranteed income stream was required to cover ongoing monthly care costs without forcing a distressed sale of the home.

The solution

Working with the broker and financial planner, the EPOA applied for a reverse mortgage with a 5-year defined term. Through this facility, the following structure was implemented:

• $180,000 at settlement: used to pay all overdue care costs and successfully remove the caveat from the property title
• $4,500 per month: a regular income stream established for a 5-year period to cover the gap in ongoing care fees.

This provided a structure that allowed the EPOA to satisfy Susan's debts to the care provider, clear the property title, and ensure her ongoing care costs were fully funded for the next five years.

Connective Reverse is a brand under Connective Credit Services Pty Ltd ACN 143 651 496,

Australian Credit Licence 389328 (Connective). Connective is the distributor of Connective

Reverse products provided by Household Capital Pty Limited ACN 618 068 214, Australian

Credit Licence 545906, who is the servicer for the credit provider, Household Capital Services

Pty Limited ACN 625 860 764.