Whether you’re already retired or planning to be in the near future, learning about the different pensioner loan options available in the market is essential for maintaining the lifestyle you’re used to without blowing through your retirement savings.
Discover the main types of loans for pensioners, as well as the key benefits and considerations to keep in mind when comparing your options:
Home Equity Access Scheme
Formerly known as the Pension Loan Scheme, the Home Equity Access Scheme is a type of pensioner loan offered by the government and distributed by Centrelink, that provides eligible Australian homeowners of Age Pension age with a fortnightly income stream coming from their home equity.
With the home equity access scheme, you can…
When deciding if the home equity access scheme is for you, remember that…
|Choose to receive lump sum payments or an ongoing income stream||You have to be Age Pension age to access it (67 years)|
|Benefit from a low interest rate (currently 3.95%)||You need to repay the loan, plus interest and legal costs, upon the sale of the property|
|Access it even if you’re a self-funded retiree||The amount of the loan increases over time and, in turn, the value of the estate passed to beneficiaries might decrease|
Home Reversion Scheme
Although not technically a type of pensioner loan, another way to access savings and fund your retirement lifestyle is through a home reversion scheme. Instead of borrowing against the value of your home, you agree to sell a share of its future sale proceeds and, in exchange, receive a lump sum payment.
With the home reversion scheme, you can…
When deciding if a home reversion scheme is for you, remember that…
|Avoid repayment obligations while your home is occupied by at least one party to the reversion contract||You’re no longer the sole owner of your home|
|Repurchase the sold share at any time||There’s less transparency when it comes to fees and costs, which can be complex and difficult to understand|
|Keep your home even if you move into residential aged care||You forgo any future growth in the value of your home relating to equity sold under the reversion contract|
A reverse mortgage is a popular form of equity release designed for homeowners aged 60+. When you take out a reverse mortgage loan, you unlock the wealth built up in your home without having to sell it, meaning you can get the best of both worlds: on one hand, you get access to funds to maintain the lifestyle you deserve and, on the other hand, you can remain in your family home for as long as you wish.
With a reverse mortgage loan, you can…
When deciding if a reverse mortgage is for you, remember that…
|Continue to enjoy the comfort of your home||Interest is capitalised, so the loan value will increase over time unless you pay the interest during the course of the loan|
|Improve your funding and live your retirement more comfortably||The amount of home equity available as a bequest will be reduced|
|Choose to receive lump sum payments or an ongoing income stream||Loan to Value Ratios (LVR) of reverse mortgages are dictated by your age and generally lower compared to standard home loans|
|Remain the owner of your home and benefit from its capital growth||Reverse mortgages tend to have a slightly higher interest rate than regular mortgages because loans are generally repaid at the end of the term|
|Choose if you want to make regular repayments or not||Drawing funds from your home now may reduce what you could potentially access later|
How our Household Loan works
Our Household Loan is a type of reverse mortgage that enables you to responsibly draw on your Household Capital™ – the savings in your home – and use it to meet your long-term retirements needs:
- Regular income. Improve your retirement income (and gain a new peace of mind) by drawing a fortnightly or monthly income.
- Refinance. Replace your regular home loan with a Household Loan; this way you don’t have to make regular repayments and so improve your retirement cash flow.
- Top up. Boost your retirement income or set up a contingency plan to cover any unexpected expenses.
- Give. Become Bank of Mum & Dad and support your kids (or grandkids) by covering mortgage expenses, contributing to a first home deposit or paying education costs.
- Care. Enjoy greater choice and flexibility when it comes to meeting your in-home or residential care needs.
- Live. Boost your life quality by buying a new car, paying for medical expenses or renovating your home, just like Lynne did after struggling to secure a loan from a bank to purchase a new car:
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Want to see how other Household Capital customers have used their Household Capital™? Have a look at our Customer Testimonials and discover real stories told by real people.
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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