New options emerge for older Australians to finance aged care without sacrificing inheritance

Australian seniors now have a range of financial tools, including reverse mortgages, government schemes, and equity reversion, to tap into their home equity for aged care costs, each with distinct implications for ownership and inheritance.

For many older Australians, the family home is the largest part of their wealth, which makes the question of whether it must be sold to pay for care especially difficult. In practice, selling is only one option. Borrowing against the property can help fund home modifications, support services under the Support at Home programme, or private care, depending on individual needs.

One common route is a reverse mortgage. Heartland Bank describes these as loans secured against the home that allow the owner to keep living there, with repayments deferred until the property is sold, the borrower moves permanently into residential aged care, or the estate is settled. Borrowers can often choose a lump sum, regular advances or both, but the debt grows over time as interest compounds. Westpac notes that such products are generally available to homeowners aged 60 and over, although it does not offer them itself.

A key protection is the no negative equity guarantee, which means borrowers cannot end up owing more than the home is worth when it is sold. Mozo says that safeguard is now mandatory under Australian regulation and has helped make reverse mortgages easier to assess for older borrowers weighing up retirement income, aged care costs and the effect on their estate. Even so, the long-term impact can be significant, particularly if the loan runs for many years.

The government’s Home Equity Access Scheme offers another way to tap property wealth. The Social Security Guide says eligible age pensioners who own Australian real estate can receive fortnightly payments through the scheme, up to a combined limit of 150% of the maximum pension rate. That may suit some households, but it is more tightly restricted than commercial lending and may not release enough money for larger care costs.

There is also a third approach: equity reversion schemes. Under this structure, the homeowner sells part of the home’s future value in return for money now, rather than taking on a loan. That avoids compound interest, but it means giving up a share of future capital growth. For some people, that trade-off may be acceptable; for others, preserving ownership and inheritance will matter more. As the various guides make clear, the best option depends on age, cash flow, housing equity and the likely length of time the property will be retained.