Could Reverse Mortgages Become Mandatory for Some Australians?

Taking out a type of reverse mortgage should be mandatory for certain Australians who need care later in life, think tank Per Capita proposed in a recently released report.

As in the United States and other countries, Australia is experiencing substantial growth in the need for senior care due to an aging population. Faced with increasing costs related to this care, the Australian government needs to seek ways to limit public spending, Per Capita Research Fellow Emily Millane wrote in the report released last month. One option: Requiring higher-wealth individuals to take out a loan against the value of their home to help pay for in-home care.

The country’s current public reverse mortgage offering, known as The Pensions Loan Scheme, could be modified so that asset-rich Australians would have to tap into their home equity to contribute to home care costs, according to the report. It describes a program in which these homeowners would take out a loan or line of credit that would be payable after the residence is sold.

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The Per Capita proposal specifies that protections should be in place for spouses of people receiving care, so that they are not forced out of the residence if the person needing care has to move or dies.

The full report, “The Head, The Heart and The House,” examines Australia’s overall housing policy as it relates to seniors. It argues that too many policies are based on the faulty assumption that people make purely “rational” decisions about where to live as they age.

“[Australia] has struggled to anticipate and respond to the financial and emotional impediments that inhibit people from downsizing or shifting to more desirable and appropriate housing as lifestyles and needs change,” Millane wrote.

Written by Tim Mullaney