What is the Home Equity Access Scheme?
The government’s Home Equity Access Scheme is a reverse mortgage, offered to older Australians to supplement their retirement income. Interest is charged and the rate compounds fortnightly on the outstanding loan balance.
A Home Equity Access Scheme loan can be flexibly repaid in full or part during the course of the loan, and must be repaid in full, plus interest, when the borrower passes away. This is generally recovered from the estate.
So, how does the Home Equity Access Scheme differ from Household Capital’s Household Loan?
Household Capital - an alternative to the Home Equity Access Scheme
Household Capital offers a Household Loan that is differentiated by its personalised service, flexibility and choice.
Some of the advantages of obtaining a Household Loan from Household Capital are:
- Loans are available to people aged 60 years and over - you don’t have to wait until you’re of Age Pension age.
- Household Capital’s lump sum loan amount is not capped - it can range from $50,000 to $1.5m.
- Household Capital offers greater flexibility with respect to a regular income stream.
- The capped loan amount via the Home Equity Access Scheme may not be sufficient to cover home renovations, medical expenses or other significant retirement costs.
- Household Capital is governed by the National Consumer Credit Protection Act (NCCP), which provides a number of consumer protections; the Home Equity Access Scheme operates outside of the NCCP.
- The Home Equity Access Scheme mandates that your property must be valued annually.
- Household Capital provides personalised service with a dedicated consultant to help you throughout the process.
It’s our mission to help Australia’s retirees Live Well At Home™ . Our retirement specialists take the time to help you understand ther options available to you for enhancing your retirement funding.
To be eligible for a Household Loan, you and your partner need to be aged 60 or older. Your prospective loan amount is calculated using a ratio of your age and home value - a loan to value ratio (LVR).
Importantly, with a Household Loan you have guaranteed occupancy. You can remain living in your home until such time as you choose to leave it.
If you’d like to know more about the Centrelink Home Equity Access Scheme, read on:
Who is eligible for the Home Equity Access Scheme?
Eligibility criteria for the Home Equity Access Scheme are:
- You or your partner must be Age Pension age or older.
- You or your partner must own real estate in Australia that is adequately and appropriately insured, to be used as security for the loan.
- You or your partner are not bankrupt or subject to a personal insolvency agreement.
What is the Pension age in Australia?
On 1 July 2021, the Age Pension age was increased to 66 years and 6 months for people born between 1 July 1955 and 31 December 1956, inclusive. If you were born on 1 January 1957 or later, you will be eligible for the Age Pension when you turn 67, which will also be the Age Pension age from 1 July 2023.
Are there other Qualifying Pensions for the Home Equity Access Scheme?
If you are under the Age Pension age, then you may qualify for the Home Equity Access Scheme if you receive a Carer Payment or Disability Support Pension. For more information visit the Australian Government Services Australia website.
How does the Centrelink Home Equity Access Scheme work?
If you qualify for Centrelink’s Home Equity Access Scheme, the loan amount must be repaid in full, plus legal costs and accrued interest on your home equity loan. There are also additional costs to start and exit the loan. Costs depend on the number of properties, and the types of properties you use as security for your loan. Two properties used for security will result in two sets of costs.
How much equity can I access?
How much equity you can access depends on how much pension you receive.
Currently, your combined loan and pension payment each fortnight can’t be more than 150% of your maximum pension rate. As such, your loan payments will also change if your pension changes.
From 1 July 2022 HEAS participants will be able to take a lump sum advance, drawing a portion of their future fortnightly loan payments. The lump sum will be capped at 50 per cent of the annual rate of the Age Pension, and over the following 12 months, it will reduce the fortnightly loan amount that can be received.
If you don’t receive a pension, you can receive the maximum amount of the HEAS as a loan payment.
The maximum you can loan is calculated on your age and your security for your loan. Your age component amount will assist you to work out how much you can loan under HEAS. Age component figures can be obtained here.
Under the scheme, couples can receive a maximum annual payment ofv $56,884 (full pension plus 50 per cent), and singles can receive a maximum of $37,925.
The security amount for the loan is based on the market value of your Australian property, excluding your mortgage or loans. If the value of your property decreases or increases, you need to inform HEAS, and this will inform your maximum loan amount.
If you want to face retirement with confidence, schedule a call back from Household Capital to discuss your retirement funding needs.
Applications for credit are subject to eligibility and lending criteria. Fees and charges are payable and terms and conditions apply (available on request). Household Capital Pty Limited is a credit representative (512757) of Mortgage Direct Pty Limited ACN 075 721 434. Australian Credit Licence 391876.
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