Getting a mortgage on a fully owned house to pay for Aged Care RAD for parent

tss on 30/08/2019 - 20:08

Hi everyone.

I'm in a situation where my only surviving parent needs to go into an aged care facility, and I can't sell their house to cover the cost of RAD (refundable deposit), so I need to look at taking out a mortgage on my own home to cover it.

I'm talking to a Financial Advisor on Monday, but in the meantime I've rang around a couple banks/lenders and it seems that no one wants to loan 50% equity on a fully owned house in order to do an Interest Only loan for a RAD which will be guaranteed to be paid back within 1 to 2 years.

Anyone else had problems with something like this, or has gone through something similar?

Cheers

Financial

Comments

  • CheapskateQueen on 30/08/2019 - 20:17

    I'm going through the pain of putting a parent into aged care too.

    They have the option of the additional daily care fee instead of the full bond. it's 5.54% pa at the moment. You could try that.

    Why can't you sell the home? If a protected person is living in it, it's not counted as an asset. Or is the RAD more expensive than the home? We've got our dad in a shared room, single is just not plausible.

    You can also split the RAD - part lump sum, part interest on the difference.

    The process is so stressful.

    The only reason my parents have anything (trust me, it's not much) is because we kids paid for so much and helped out with the mortgage. now, because we didn't leave them destitute, centrelink is taking it all. It's sick.

    • serpserpserp on 30/08/2019 - 22:51

      we didn't leave them destitute, centrelink is taking it all. It's sick.

      It is crazy isn't it? You are better off (if your parents are not financially secure) to strip them of their assets at retirement and funnel the funds back to them via cash than to help them out into a modest property. The sad thing is do we know if people are going to live 5 years after retirement or another 35?

      • HighAndDry on 31/08/2019 - 12:33

        It's only crazy because Centrelink pays for it at all. You're welcome to pay for them out of pocket.

  • DashCam AKA Rolts on 30/08/2019 - 20:50
    +4

    Make sure the financial advisor is a specialist in aged care issues, it's a very different set of circumstances to general financial advice.

  • mortgagebroker on 30/08/2019 - 21:42

    Search for Latrobe aged care loan.

    • serpserpserp on 30/08/2019 - 22:47

      Interesting. The comparison rate is 7.60% p.a and they are comparing it to a 25 years $150k loan although the max tenor you can get on this Latrobe loan is 7 years! Seems a little misleading. But they certainly are making their coin in this style of loan.

      To be honest I am not sure why the big 4 don't have comparable loan products. Probably because the payback period for these loans will be the full tenor and dependent on the sale of a property (and not really a cashflow lend). There is a bit of risk involved.

      • ihbh on 31/08/2019 - 06:59

        I am not sure why the big 4 don't have comparable loan products

        Probably too brand risky and insufficient scale. Imagine someone not repaying the loan for whatever reason and them having to foreclose the property mortgaged and the publicity surrounding it… I had to mortgage my own home to be able to afford putting Dad or Mum in a nursing home. Some crap happened and now the bank is turfing me out of my home.

        • serpserpserp on 31/08/2019 - 12:20

          Some crap happened and now the bank is turfing me out of my home.

          Not sure of your circumstances and sorry to hear it. But I assume you just can't pay your mortgage anymore and therefore they are rightfully taking possession of their collateral?

          • HighAndDry on 31/08/2019 - 12:35

            @serpserpserp: That's hypothetical they're raising as how it could be bad PR. This is the consequence of all the "banks are bad" drama from the Royal Commission - easier for the banks to just not offer these services then.

          • ihbh on 31/08/2019 - 13:32

            @serpserpserp: Sorry, should have put in quotes as per HighAndDry.

            • [Deactivated] on 01/09/2019 - 19:34
              -1

              @ihbh: Glad to hear it was hypothetical and you're not being turfed out of your home.

  • Smulder on 30/08/2019 - 23:27

    Could you do a reverse mortgage on their house?

  • Eeples on 30/08/2019 - 23:43

    Why can’t you sell the house?

  • tss on 31/08/2019 - 07:52

    Thanks for the replies everyone.

    The reason I can't sell the house is because there are other siblings who are causing problems.

    I am speaking to a Financial Advisor on Monday to see what my options are.

    The idea was to pay a minimum interest rate (with a RAD) while my parent is still alive, rather than paying the inflated interest rate (as pointed out in a previous comment - which the gov/homes set) for a DAP payment. That is why I thought that an Interest Only would be the way to go.

    Anyway, I'll see what happens on Monday. I may need to contact the lawyer was well. AHH, more money.

    • RockyRaccoon on 31/08/2019 - 08:00
      +2

      other siblings who are causing problems

      You need to sort this out before going into debt, otherwise you might just get into deeper issues.

      Sometimes the smartest way isnt the cheapest way

    • serpserpserp on 31/08/2019 - 12:21
      +2

      other siblings who are causing problems.

      Well who has power of attorney from your parents stand point?

    • HighAndDry on 31/08/2019 - 12:36

      If you're paying lawyers anyway, pay them to deal with the siblings.

    • Geekomatic on 31/08/2019 - 14:04

      I wonder if a good mortgage broker would be another person to speak with? Check around locally and see what sort of reviews you can find. Can't hurt?

    • [Deactivated] on 01/09/2019 - 18:00
      +1

      The reason I can't sell the house is because there are other siblings who are causing problems.

      If they don't want to sell the house, are they willing to have your parent move in with them? They can't have their cake and eat it.

      Lawyer up. If the house belong to your parent , your siblings shouldn't have any say in the matter.

      • Eeples on 01/09/2019 - 19:09

        I was assuming the parent already lives in the house occupied by the siblings. That would most likely except the house from the ACAT assessment.
        That may mean that no RAD will need to be paid at all.
        I am reasonable sure that aged care places are required to provide places for people who don't have enough money for RAD's.

        • [Deactivated] on 01/09/2019 - 19:32

          If that was the case, OP wouldn't be looking at taking a mortgage on his own home.

          • Eeples on 05/09/2019 - 12:37

            @[Deactivated]: The OP shouldn't be looking at it at all.
            Either the parent's house is sold, rented out ……or it is exempt.

  • spal on 31/08/2019 - 08:40
    +1

    This is scary. Aged care is one area which I don’t have any clue about. If it feels better, I take my hat off to you to trying to get the best for your parent even in the face of absurdity.

  • CrankyCarrot on 23/09/2019 - 19:05

    What's the latest with this, OP?

    I'm may be in similar hot water imminently.

    • tss on 24/09/2019 - 12:38

      I had luck going to Bendigo Bank and UBank, although my mother unfortunately has now passed away - quite suddenly, so I didnt need to continue with the process.

      The other lenders didn't want to touch it as soon as you said that you want it for a RAD.

      Not having existing debt also caused problems - I assume because they want you try to keep paying off the debt or to consolidate to their services.

      Anyway, give those two a try and see how you go.

  • tss on 24/09/2019 - 12:46

    Thanks to all that replied.

    I was going to see a Financial Advisor who specialises in Aged Care provisioning, but they wanted to charge $275 per hour, and based on what I was able to find out by talking to the Care Providers directly I didn't think they would have added much more which.

    I definitely recommend Southern Cross as a care provider, and their placement team can provide you with alot of help. (Im not affiliated with them - they just gave a really good service and support).

    All the best to anyone else who ends up in this situation - just try to keep seeing your loved ones before it becomes too late.

    • CrankyCarrot on 24/09/2019 - 15:01

      Thanks for the info.

      Most financial planners will give you the first session free (typically a half hour IME). If you really want to be Thrifty about it, as I do, you could in theory just make a bunch of first appointments and ask for all the info that way. Obviously if you want more than info, ie a plan that accounts for your specifics you'll have to pony up - but I found just the initial consult useful enough.

      Sorry to hear about your mum, but at least she was spared the nursing home existence. If she's anything like my dad she would not have been looking forward to that at all.

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