Is it worth selling my house if Im going into aged care?
For senior Australians who cannot live independently at home, residential aged care can provide accommodation, personal care and general health care. People usually think this is expensive. And many assume they need to sell their home to pay for a lump-sum deposit. But thats not necessarily the case. Heres what you need to consider. Here's what you'll have to pay for  You may get some financial support  Fees for residential aged are complex and can be confusing. Some are for your daily care, some are means-tested, some are for your accommodation and some pay for extras, such as cable TV. But its easier to think of these fees as falling into two categories:  an entry deposit, which is usually more than $A300,000, and is refunded when you leave aged care  daily ongoing fees, which are $52.71-$300 a day, or more. These cover the basic daily fee, which everyone pays, and the means-tested care fee. To find out how much government support youll receive for both these categories, you will have a means test to assess your income and assets. This means test is similar (but different) to the means test for the aged pension. Generally speaking, the lower your aged-care means test amount, the more government support youll receive for aged care. With full support, you dont need to pay an entry deposit. But you still need to pay the basic daily fee (currently, $52.71 a day), equivalent to 85% of your aged pension. If you get partial support, you pay less for your entry deposit and ongoing fees. Read more: How to check if your mum or dad's nursing home is up to scratch  You dont need a lump sum  You dont have to pay for your entry deposit as a lump sum. You can choose to pay a rental-style daily cost instead. This is calculated as follows: you multiply the amount of the required entry deposit by the maximum permissible interest rate. This rate is set by government and is currently at 4.01% per year for new residents. Then you divide that sum by 365 to give a daily rate. This option is like borrowing money to pay for your entry deposit via an interest-only loan. You can also pay for your entry deposit with a combination of a lump sum and a daily rental cost. As its not compulsory to pay a lump sum for your entry deposit, you have different options for dealing with your family home. Option 1: keep your house and rent it out  This allows you to use the rental-style daily cost to finance your entry deposit. Pros  you could have more income from rent. This can help pay for the rental-style daily cost and ongoing fees of aged care  you might have a special sentimental attachment to your family house. So keeping it might be a less confronting option  keeping an expensive family house will not heavily impact your residential aged care cost. Thats because any value of your family house above $173,075.20 will be excluded from your means test  you can still access the capital gains of your house, as house prices rise. Cons  your rental income needs to be included in the means test for your aged pension. So you might get less aged pension  you might need to pay income tax on the rental income  compared to the lump sum payment, choosing the rental-style daily cost means you will end up paying more  you are subject to a changing rental market. Read more: Home-owning older Australians should pay more for residential aged care  Option 2: keep your house and rent it out, with a twist  If you have some savings, you can use a combination of a lump sum and daily rental cost to pay for your entry deposit. Pros  like option 1, you can keep your house and have a steady income  the amount of lump sum deposit will not be counted as an asset in the aged-care means test. Cons  like option 1, you could have less pension income, higher age-care costs and need to pay more income tax  you have less liquid assets (assets you could quickly sell or access), which could be handy in an emergency. Option 3: sell your house  If you sell your house, you can use all or part of the proceeds to pay for your entry deposit. Pros  if you have any money left over after selling your house and paying for your entry deposit, you can invest the rest  as your entry deposit is exempt from your aged pension means test, it means more pension income. Cons  if you have money left over after selling your house, this will be included in the aged-care means test. So you can end up with less financial support for aged care. How to decide between renovating and selling  In a nutshell  Keeping your house and renting it out (option 1 or 2) can give you a better income stream, which you can use to cover other living costs. And if youre not concerned about having access to liquid assets in an emergency, option 2 can be better for you than option 1. But selling your house (option 3) avoids you being exposed to a changing rental market, particularly if the economy is going into recession. It also gives you more capital, and you dont need to pay a rental-style daily cost. This article is general in nature, and should not be considered financial advice. For advice tailored to your individual situation and your personal finances, please see a qualified financial planner.