Health of Older People in New Zealand

Questions and Answers on Residential Care Loans

People whose assets are over the relevant applicable asset threshold in the Act, (because they own their former home) may apply for a residential care loan. Whether a person is eligible for a residential care loan will depend on whether the person meets the loan criteria. The criteria were notified in the New Zealand Gazette on 2 June 2005.

Refer also to the Residential loan scheme policy including the criteria and What are the asset thresholds?

Back to Questions and Answers on Residential Care and Income and Asset Testing

What is a residential care loan?

A residential care loan is an agreement between the Crown and a person (“client”) in long-term residential care. Under the agreement, the Crown advances funds to a rest home or hospital, on the client’s behalf, for long-term residential care services received by the client (that are equivalent to contracted care services). The loan is interest free. The loan is secured by a caveat over the client’s home. The loan must be repaid within six months after the client dies or when the former home is sold or otherwise disposed of, whichever date is earlier or when any other circumstances set out in the loan agreement occur.

Residential care loans are available through the Residential Care Loan Scheme administered by Work and Income. Work and Income will provide a person with an application form if the person is assessed as having assets above the applicable asset threshold in the Act and wishes to apply for a residential care loan.

Will a residential care loan (caveat) be automatically changed to a subsidy?

No, a loan client will not automatically be transferred to a residential care subsidy from a residential care loan.

The Ministry of Health will advise a loan client to apply for a review of their financial means assessment from Work and Income (free phone 0800 999 727) when it is estimated that their assets are getting close to the applicable asset threshold.

If the financial means assessment determines that a loan client’s assets are equal to or below the applicable asset threshold in the Act, the client will be entitled to have Government funding paid on their behalf (the residential care subsidy). Payments drawn against the loan will cease from either the date of the financial means assessment that established the person was eligible for Government funding (the residential care subsidy) or up to 90 days prior to that assessment (depending on when eligibility occurred under the Act).

The loan balance will not be wiped out and the usual repayment conditions will continue to apply– six months after the client dies or when the house is sold or disposed, whichever date is earlier or when any other circumstances set out in the loan agreement occur.

Refer to Who is responsible for funding residential care services for older people? and What are the criteria for entry into residential care?

If a person has a residential care loan, how much will be advanced from the loan to pay for the cost of their care?

The amount of the loan advance is equivalent to the maximum contribution for that region (the contract price for rest home care in each region). If the person is assessed as requiring a higher level of care, then the DHB will pay for the difference between the loan advance and the price of higher levels of contracted care services. Any private agreement between the resident and the rest home or hospital for any services that are additional to what the loan covers cannot vary the loan agreement as it is a separate contract entered into between the resident and the Crown.

For information on services that are not covered by the Age Related Residential Care Contract refer to While the person is in care, what individual services/items do they have to pay for that are not covered by government funding (the residential care subsidy)?

Where can I access information about the loans scheme?

View the policy of the Residential Care Loan Scheme.

For information about applying for a residential care loan, contact Work and Income’s Residential Subsidy Unit, free phone 0800 999 727.

If you have questions about the Residential Care Loan Scheme you can also e-mail the Health of Older People team at olderpeople@moh.govt.nz or write to the Health of Older People team, Sector Policy Directorate, Ministry of Health, P.O Box 5013, WELLINGTON.

Page last reviewed: 20 July 2007