Reverse mortgages: correcting the myths

A reverse mortgage can be a great option to assist with paying a Residential Accommodation Deposit (RAD), but can be overlooked because of some persistent myths.

Affinity Aged Care Senior Adviser Don Swanborough says confusion around reverse mortgages means some people are reluctant to consider them when it comes to paying a RAD.

“I’ve had many clients who assume that the principal and interest can accumulate to such an extent that the home will have negative equity – that is, owing more than the value of the property,” Don said.

“This is one of the greatest myths of reverse mortgages and the government’s recent introduction of ‘no negative equity’ legislation puts this myth to rest.”

Don said that reverse mortgages can be a useful way to pay a RAD for a number of reasons.

“A reverse mortgage allows you to retain the family home, which can be a great comfort to many making the significant transition into aged care.

“Another great benefit of a reverse mortgage is the home can be rented, with rental income not forming part of the assessment for aged pension if the home owner is in permanent aged care.

“However under this arrangement it is crucial that financial advice is sought to set up the loan and aged care accommodation payments to ensure the home is exempt for age pension purposes.

“The mortgage contract must also allow the home to be rented while the homeowner is in permanent aged care.”

He said a reverse mortgage could also provide cash to fully or partly fund the RAD.

“And of course a RAD is returned to the person if they leave the aged care facility (nursing home) or will go to the estate when they pass away, which can cover the mortgage principal,” Don said.


According to Don, financing RADs in this way is growing in popularity in booming property areas around Australia.

“In these cases it is a great option because you can retain your home while it hopefully also grows in value.

“Like many aspects of aged care planning, the process can be complex so it is crucial to speak to a certified aged care adviser before making any decisions.”

Affinity Aged Care Financial Services

9/60 Carrington St, Sydney NSW 2000
02 8078 0888
[email protected]

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A special thanks to our contributors

Jill Donaldson


Jill has been practicing as a clinical physiotherapist for 30 years. For the last 13 years she has worked solely in the Aged Care sector in more than 50 metropolitan and regional facilities. Jill has also toured care facilities in the US and Africa and is a passionate advocate for both the residents in aged care and the staff who care for them. She researches and writes for DCM Media.

Chris Baynes

DCM Media, agedcare101

Chris has been a journalist and publisher in the retirement village and aged care sectors for 11 years. He has visited over 250 retirement villages and 50 aged care facilities both within Australia and internationally. Chris is a regular speaker at industry conferences plus is a frequent radio commentator.

Annie Donaldson

Nurse and Carer

Annie has a long career in both nursing and the media. She has planned and co-ordinated the medical support from both international TV productions and major stadium events. In recent years she has been a primary family carer plus involved in structured carer support.