Australia
The standard reverse mortgage is designed for homeowners who are living in their property and want to access equity without selling. The Aged Care Option is a separate product for a different situation: borrowers who are entering or have already entered permanent residential aged care, and who need to access equity from a property they are no longer living in.
Understanding the difference between these two products — and which applies in a given set of circumstances — is essential before any application is made.
Standard Reverse Mortgage vs Aged Care Option
The key distinction is occupancy status:
Standard Reverse Mortgage: For borrowers who currently reside in and intend to stay in their home. There is no set term. The loan ends when the last borrower permanently leaves the property — typically through sale, move to aged care, or death. If home care is the purpose of the loan (rather than residential aged care), a standard reverse mortgage applies — and the minimum initial advance ($5,000) is waived for home care purposes.
Aged Care Option: For borrowers where all customers are residing in or moving to permanent long-term residential aged care. The maximum term is 5 years. The loan must be repaid within 5 years of commencement, or within 12 months of the passing of the last nominated borrower — whichever occurs first.
A borrower who is still living at home but planning to enter aged care cannot use the Aged Care Option — they must use the Standard Reverse Mortgage. The Aged Care Option is available only once the move to permanent care is confirmed.
Eligibility criteria and thresholds are subject to change — confirm current rules with the relevant authority.
Eligibility and Property Requirements
Customer eligibility: Customers must be aged 60 or over. A maximum of two customers can apply under one loan.
Property criteria: The security property must be residential, of conventional construction, and in good repair. The property may be tenanted subject to lender criteria. It must be mortgage free — or the loan proceeds must be used to repay any outstanding mortgage as part of the settlement. The minimum property value varies by lender and location.
Properties in retirement villages cannot be used as security for either the Standard Reverse Mortgage or the Aged Care Option.
The maximum borrowing amount is calculated using the same age-based LVR table as the standard product:
| Age of Youngest Borrower | Maximum % of Home Value |
|---|---|
| 60 | 20% |
| 65 | 25% |
| 70 | 30% |
| 75 | 35% |
| 80 | 40% |
| 85 | 45% |
| 90 | 50% |
For investment properties or holiday homes used as security under the Aged Care Option, the maximum available amount is reduced by 10%.
LVR limits vary by lender and are subject to individual assessment.
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What the Aged Care Option Is Used For
The Aged Care Option can be used for any legitimate purpose, but the primary use cases are:
Refundable Accommodation Deposit (RAD). The RAD is a lump sum payment required by many residential aged care facilities on entry — reflecting the standard of accommodation. RADs can exceed $500,000 in major metropolitan facilities. For asset-rich retirees who have not yet sold the family home, the Aged Care Option provides access to equity to fund the RAD without a rushed property sale.
Daily Accommodation Payment (DAP). Some residents pay a daily accommodation payment rather than — or in addition to — a RAD. The Aged Care Option can be structured to fund ongoing DAP costs where needed.
Home care costs. Where a borrower is receiving care in their own home, the Standard Reverse Mortgage (not the Aged Care Option) applies and can fund ongoing home care expenses.
General living and care costs. The loan can also assist with day-to-day living costs, medical expenses, or family support during the transition to care.
The 5-Year Term: Planning Around It
The Aged Care Option's 5-year maximum term requires planning. The loan must be fully repaid within 5 years. For the family home to fund this facility, the property will typically need to be sold before the 5-year term expires — unless other assets are available to repay the loan.
For families using the Aged Care Option to bridge the gap between aged care entry and property sale, the key planning consideration is the intended sale timeline. A sale within 2–3 years leaves sufficient margin against the 5-year term. A family expecting to hold the property for longer should confirm the timeline is achievable before committing to the facility.
The property may be tenanted during the Aged Care Option period — rental income from the tenanted property can contribute to holding costs and potentially to voluntary repayments that reduce the accruing balance.
Fees and rates vary by lender and are subject to change — confirm current pricing with your broker.
The Power of Attorney Option
Where a borrower is unable to manage their own affairs, the Aged Care Option loan may be applied for under a power of attorney, administration order, or guardianship order — subject to lender criteria.
This is a practical consideration for families managing aged care transitions on behalf of a parent or partner who lacks capacity. Confirm with the lender whether an existing power of attorney document meets their requirements, or whether a specific form is required.
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The information provided in this blog is for educational purposes only and should not be considered financial advice. Always consult with a professional financial advisor or lender for specific lending decisions.
