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If you’re thinking about making the move into a retirement community, there are several costs to understand and consider.
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06 October 2022
| Retirement Living
Whether you are downsizing to a home that is easier to manage or you are simply attracted to the community spirit of a retirement village, you are certainly in good company. The 2021 Retirement Living Census by PWC and the Property Council of Australia showed that retirement villages are swiftly growing in popularity amongst older Australians, with increased affordability and a booming development pipeline.
Once you’ve toured a few villages, it’s easy to understand their attraction. Many offer relaxed, community living with resort-style facilities on your doorstep. Residents often have easy access to swimming pools, walking tracks, salons, bowling greens and more, all whilst being able to connect with like-minded people at a similar stage of life.
The costs associated with this popular lifestyle choice can be more complex than a sale within the wider property market, but here we explain how it works in three easy steps:
Once you’ve found your dream home, the retirement village operator will ask you to pay a deposit to take the property off the market. The deposit is a fixed amount but will vary depending on the village you are considering. It might range from $1,000 to $5,000.
If you decide to pull out of the sale before you move in, your operator is legally required to refund your deposit in full.
Your entry payment is the lump sum you pay when you move into the retirement village and buys you the right to live in your home.
The entry payment can also be referred to as:
The entry payment is based on the market value of the property. If a two-bedroom apartment is valued at $500,000, then this will be the cost of your entry payment.
Just like the broader housing market, the value of retirement village units can vary greatly depending on which location you choose, the age of the property, and what kind of facilities are available in the village.
Most of the time, buying into a retirement village is more affordable than the local housing market. The 2021 Retirement Living Census found that retirement village homes were significantly less than the median house price in the same postcode. Even as the market steadies in the wake of the pandemic, prospective residents might expect their retirement village unit to be valued at around 80 percent or less of a similar property in the local housing market, dependent on their choice of operator.
There are often flexible entry payment options too. You might choose to pay less initially and have a higher departure fee when you leave (we go into further detail about this in step 3).
As always, it is important to consider your own personal circumstances when making financial decisions and consult with a financial advisor for tailored advice.
If you buy into a retirement village in NSW or the ACT, the three most common types of ownership (or tenure) that your operator might offer are:
At BaptistCare, we offer our customers a Loan Licence Agreement. This means that your ingoing payment will buy you the ‘licence’ to live in your home for as long as you like.
There are several benefits associated with a Loan Licence Agreement, such as:
Whilst you are enjoying village life, there will be recurrent, fortnightly charges to pay for the general upkeep of the estate, a little bit like strata levies. This means you can enjoy retirement living with peace of mind, knowing that any unexpected maintenance costs are covered - and dealt with - by your provider.
These charges go towards:
You will be required to pay for your:
Recurrent fees can vary depending on the retirement village and the type of communal facilities on offer. You can learn about current BaptistCare rates across our villages by completing the enquiry form at the bottom of this page.
The Deferred Management Fee (DMF) is also known as:
The Deferred Management Fee (DMF) covers the ongoing improvement and sometimes the expansion of village facilities to ensure residents can enjoy them long into the future.
Incorporating the bulk of these more considerable maintenance costs into the Deferred Management Fee (DMF) means that village operators like BaptistCare can keep residents’ fortnightly fees lower as well as offering more flexibility around entry payment options.
When you leave the retirement village permanently, your initial entry payment will be returned to you minus the Deferred Management Fee (DMF).
At BaptistCare villages, this is commonly around 30 percent of what you initially paid if you live in the village for six years or more. Before that, it is calculated at a rate of five percent per year.
The exact amount of the DMF can be customized based on your individual circumstances, and it is always recommended that you consult with a financial planner to work out which options will suit you best.
For some, the flexible options around Entry Payments and Deferred Management Fees make retirement living significantly more affordable – opening the door to a lifestyle they hadn’t previously thought possible.
Chris and Judi bought into a Sydney retirement village in 2014.
They have lived happily in their two-bedroom, two-bathroom unit for eight years, and have now decided to leave the retirement village and move in with family.
*Fictional case study indicative of flexible entry payment and DMF options
Donna bought into Canberra retirement village in 2018.
After three years, she decided to leave her three-bedroom unit and move into an aged care home.
**Fictional case study indicative of flexible entry payment and DMF options
Most village residents gain much fulfillment from being part of a retirement living community. But as with any significant life change, there is always an adjustment period. If you are downsizing, for example, or are new to village life, it can take a few weeks to get settled and feel truly at home.
If you decide, however, that you would like to leave the retirement village, BaptistCare villages offer a 90-day money-back guarantee, along with a full refund of any recurrent charges you paid. You will only be charged market rent for the time that you stayed in the property.
If you’d like to know more, contact us via the enquiry form below, and one of our friendly staff will be in touch to answer any questions you may have, otherwise, you can find your closest retirement village.
BaptistCare has been trusted by thousands of Australians across the retirement living, aged care and community service sectors since 1944. While we are not-for-profit, there are a few things that we certainly are for: outstanding quality and a quest to truly make a difference, not just in our retirement living communities, but in all communities.
Click the link below to learn more about BaptistCare's
Retirement Living | Financials Explained | Adaptive Living | Find a village
If you would like to know more, please contact us on 1300 275 227 or complete the enquiry form and one of our customer representatives will be in touch.