Much has been written about the recently revised Centrelink Home Equity Access Scheme (HEAS). It is a government-funded reverse mortgage loan that offers eligible seniors (not necessarily pension recipients) increased pension payments advanced as a reverse mortgage loan.
Borrowers must be property owners and the loan is secured by a caveat over their home, or an investment property.
Some articles have incorrectly stated that eligibility is restricted to Australians of Age Pension age who are currently receiving an eligible pension. This is not the case – You do not have to be receiving a pension to be eligible for the HEAS.
The loans are administered by Centrelink and are offered at a low interest rate, (currently 3.95%) and the loan funds are advanced as extra payments on a fortnightly basis. For a single person a borrower could access $538.35 p/f, whilst a couple could access $826.70 p/f. (as at 20 th Sept 2023).
Access to a HEAS is now available as a lump sum, but cannot be greater than the combination of 26 fortnightly payments – $13,997.10 for singles and a combined $21,494.20 for a couple. As with conventional reverse mortgage loans, the loan amounts received are not taxable. Centrelink regards reverse mortgage funding as a drawdown on capital, and assesses the funds on what use is made. They can be assessed in both assets and deemed income calculations.
Conventional Reverse Mortgage
The maximum loan amount with a conventional reverse mortgage is based on a formula of age and property value, starting at 15% of property value at age 55 and increasing by 1% per year of age, up to 45% at age 90. There is no maximum dollar amount on conventional reverse mortgage loans. Both loans require a property valuation and borrowers pay for establishment fees and charges.
Summary.
The Home Equity Access Scheme offers pensioners (who only require extra income on a fortnightly basis, or a small lump sum), a lower cost option to obtain those funds. Payments are limited to the difference between the amount of pension they are currently receiving and 150% of the full pension rate.
People requiring higher income funding (I.e. more than the fortnightly payment available for the HEAS, or the small lump sum) or larger lump sum payments will need to apply for a Conventional Reverse Mortgage loan.
Would you like to find out the options available to you? Contact Your Advisor today for a free discussion on how you can better meet your financial requirements in retirement.
Michelle (aged 65) lives in her home in the Northern Beaches. Her husband Anthony (aged 71) lives in an Aged Care centre specialising in the care of people with Alzheimer’s and dementia. He has been in Aged Care for over 5 years after developing early onset dementia. Michelle is Anthony’s Power of Attorney. Michelle and her husband had a very successful business on the North Shore that was adversely affected by Anthony’s dementia, and then Covid-19. She had to close the business as it could not be sold.