Residential & Commercial Specialist Lending
There are many questions to consider when making the transition into an aged care facility. However the reality is that these decisions are difficult, stressful and most of the time need to be made quickly. Importantly, a Refundable Accommodation Deposit (RAD) needs to be arranged to transfer a loved one into an aged care facility. Such deposits may exceed $500,000.
How to fund this payment is a complex problem for many families. With this in mind, La Trobe Financial offers a mortgage that can be used specifically to make this payment, reducing the stress for families at a very emotional time.
Our experienced team has developed a product that is easy to understand and set up, making transition to aged care less complicated.
|3||reasons to deal with
La Trobe Financial
for your loans ...
Good Value for Money
No Risk or Equalisation fees ≤ 80% LVR
|Product Name||Aged Care Loan|
|Current Rate^||5.60%^ (steps up 2%p.a. in years 6 & 7)|
|Security Type||Residential and/or investment security collateral and charge over RAD.|
|Loan Purpose||To secure a place in an Aged Care facility by paying RAD|
|Verification Required||Borrower (or Power of Attorney holder) declaration of understanding of security taken and independent financial and legal advice on Aged Care Loan|
|Personal or Business/Investment Purposes||Personal use only for individuals aged > 80 years to pay for ongoing care fees (DAP) renovations or repay existing debt.|
|Minimum Loan Amount||$100,000|
|Maximum Loan Amount||$750,000 (50% LVR)|
|Maximum LVR||50% of value of home|
|Lenders Mortgage Insurance required||No|
|Maximum Loan Term||7 Years|
No capital payments required during loan term.
No interest payments required until the loan outstanding reaches 140% of initial amount borrowed.
|Maximum Interest Only Term||7 Years|
|Interest Rate Type||Variable|
|Application Fee (excl. Val. & Legal Fees)||$2,500, ask about our Specials. Other fees applicable during setup.|
* The comparison rate is based on secured credit of $150,000 and a term of 25 years. WARNING Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan. Terms, conditions, fees, charges and La Trobe Financial Lending criteria apply. ^ Depends on the loan amount, LVR and/or risk grade of the borrower.
- Breathing space
- Retain the family home
- Able to visit home
- Option to return home
- Can rent out property
- Property capped at $159K for Means-tested care fee (MTCF)
- No CGT for 6 years
- Borrowing may offset RAD cost
- No “fire sale”
- Less family issues in who pays
- No need for guarantees
- Able to renovate or repair ahead of rental or sale
Yes, an accommodation payment can be paid in a number of ways:
- Lump sum – the RAD is the capital value of the room that the resident is occupying.
- Daily fee – Daily Accommodation Payment (DAP) is calculated by reference to the RAD – applying an interest rate (set by the government, currently 5.76%) to the lump sum amount, then dividing by 365 to make a daily fee.
- Partial lump sum + partial daily fee RAD + DAP is where the daily fee component (DAP) can be deducted from the lump sum component (RAD).
La Trobe Financial offers a loan that can be used specifically to release the equity in the applicant’s home to pay the RAD, which is payable upon entering an Aged Care Facility.
The RAD to the Aged Care Facility is secured by a mortgage over the borrower’s home and a charge over the RAD. When the time comes, the Aged Care Facility refunds the RAD back to La Trobe Financial and we release the mortgage after the borrower or estate has paid any of the accrued interest.
La Trobe Financial’s Aged Care loan is specifically designed to fund the payment of the RAD.
There are a number of product features that make the La Trobe Financial Aged Care loan not a Reverse Mortgage (RM). These include:
- The borrower is vacating their security property and moving into Aged Care (RM borrower stays at home);
- Payments are required under the Aged Care loan as the LVR reaches 70% (RM no payments are required);
- The aged care loan is a 7 year term (RM is whole of life or until property sale and a RM can be repaid early).
The La Trobe Financial Aged Care loan gives the applicant the ability and flexibility to rent out the security property to produce income. Whilst this is not exempt from means testing, when combined with a RAD payment, it can result in a lower means tested fee outcome.
The La Trobe Financial Aged Care loan can be utilised to fund repairs or renovations to the property perhaps ahead of rental or sale, repayment of debts/mortgage and payment of loan set up fees.
The La Trobe Financial Aged Care loan is eligible to individuals aged over 80 considering a move into aged care, or already a resident. However, younger borrowers may be considered on application.
The application may be lodged by the borrower or more commonly under a Power of Attorney*.
*The registered Power of Attorney will need to comply with relevant state requirements which will be verified by our solicitors in the documentation process.
The La Trobe Financial aged care product is not a reverse mortgage therefore resulting in a less complex application process. Our application form is 4 pages versus typically reverse mortgage of 15+ pages and we personally call families and attorneys and walk through their details.
The Interest rate is currently 5.60% variable. This is less than the MPIR (Maximum Permissible Interest Rate). The rate is applicable for the first 5 years (steps up 2% in years 6 and 7). Interest repayments become due when the total loan balance increases to 140% of the initial settlement amount advanced at settlement.
Interest is charged monthly and calculated using a simple interest methodology based on the outstanding loan balance. The borrower has the option to repay any $ amount of principal or interest at any time subject to applicable fees.
Repayments of interest are only required to be made when the total balance of the loan increases to 140% of the initial settlement amount, usually around 5 years.
The La Trobe Financial Aged Care loan will lend up to 50% of the property value for a maximum of 7 years. A mortgage is taken over the RAD and the property. Interest payments can be made at any time. If interest payments are not made, the gross loan balance will increase over time until the point where interest payments commence around year 5.
The RAD value will remain constant over time unless you have agreed to deductions with your aged care provider.
The net loan balance, being the difference between the gross loan balance and the RAD refund (less any deductions) reflects the residual loan amount due.
Therefore, it would be expected that the net borrowings will reflect only the interest accrued (assuming no aged care facility deductions eg fees or daily payments if a partial RAD is paid). Consequentially the risk of negative equity is reduced given we net off the remaining RAD.
At the expiry of the initial loan term of 7 years, an extension of term may be considered subject to valuation.
Yes, subject to fees and charges. Repayments are due on:
- Leaving the facility (facility to refund the RAD)
- Death (Estate/Will has 9 months to repay any residual amount)
- Sale of property; or
- Loan term expiry
We strongly recommend customers seek independent financial advice to determine the suitability of this product.
To speak directly to our aged care specialists, call 13 80 10 or your local Senior Manager Client Partnerships team.
CONSUMER ADVISORY NOTE
Maximum loan amounts and LVRs may vary based on security offered
* The comparison rate is based on secured credit of $150,000 and a term of 25 years. WARNING Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan. Terms, conditions, fees, charges and La Trobe Financial Lending criteria apply.
^ Depends on the loan amount and risk grade of borrower.
Due to the features of this product including a maximum loan term of seven years the comparison rate has been calculated on a twenty five year term applying a weighted average interest rate of 7.59% across the term of the loan. This rate incorporates the products initial interest rate of 5.99% over the first five years and a step up rate to 7.99% in years six and seven. Costs such as redraw or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan. Terms, conditions, fees and charges and La Trobe Financial lending criteria apply.