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With aged care finance becoming increasingly significant for Australia’s ageing population, La Trobe Financial broker Paul Dwyer discusses the ins and outs of what is an important area of specialist lending and the benefits of adding it to your portfolio.
What's involved with aged care finance, how does it differ from standard residential lending?
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Principally, an aged care loan is for a five-year term. It allows a resident going into a care, or their family, to borrow against the house to pay for a lump sum or a periodical payment to the aged care provider.
What percentage of your total loan book is aged care finance?
All of my business is senior's finance, including reverse mortgages and aged care. Due to the fact that the aged care side is towards the last years of someone's life, it's an extension of the normal reverse mortgage concept of using the equity in your home. So out of that, my aged care loans would probably be about 20-25 per cent of my business book.
For brokers who might be looking to add it to their portfolio, what sort of advice would you give them in terms of where to start and how to be successful?
[Aged care finance] is for the purpose of family members going into care, and the finances involved can be distressing as well as the emotional side of the person going into care. So it's not the same type of loan as you would be approaching for a first home buyer. You would also need to have an understanding and knowledge of aged care rules and regulations, and aged pension rules and regulations, because both of those can have an effect upon the decision of borrowing.
Also, the decision for most families would be to either sell or borrow against the family home. Most families will perhaps not understand that borrowing against the home for aged care is an option, and therefore, a greater education would allow, and depending on whether it's from La Trobe or from other funders or other aged care facilities, would perhaps bring more options available to the products.
The overall picture is that it's sitting down with families at an emotional time when one of their parents most likely is going into care. A lot of the decision making for borrowing or selling the family home has to be done within a short time frame, because a lot of seniors going into care come out of hospitals, and the hospitals have a policy of pushing people out of their hospital as soon as possible as soon as they're considered fit enough to leave, and so their families have got to find an aged care facility very quickly, so a decision has to be made with promptness.
What does the future hold for aged care finance?
Going forward, we anticipate that there will be increased accreditation, which in the senior's market may include specialised accreditation for aged care loans. We've seen this market segment requiring greater knowledge and awareness.
