Frequently Asked Questions

Yes. A Household Loan can be used to pay for your in-home care requirements, giving you greater choice and flexibility in terms of the services you can access.

If you or a loved one need to move into residential aged care, a Household Loan can be used to pay either the Refundable Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP).

The waiting list for government-funded in-home care packages is significant. There are currently more than 100,000 people on the waiting list, and many people have to accept a package providing a lower level of care than needed.

You don’t need to wait. You can use your Household Capital to choose your own in-home care supplier and services. Maybe you’d like someone to do the cooking, weed your garden or take you shopping.

Having the right in-home care services, delivered by someone you like and with the regularity you need, can enhance your wellbeing and help you to Live Well At Home^TM.

Some of our customers have needed to make the transition to an aged care facility. Refundable accommodation deposits (RADs) can be complex and expensive.

For many, it may seem the only option available to fund aged care is to sell the family home.

This may not be the best decision financially, emotionally or for your beneficiaries. Right now, your home is a non-assessible asset for your pension and a capped asset for assessing aged care fees. That could change if you sell your home.

A Household Loan provides choice and flexibility. It’s particularly useful where one person is moving into residential aged care and the other wishes to remain in the family home. You can use your Household Capital to:

• Pay the RAD and broaden your care choices.
• Draw an income stream to pay the daily accommodation payment (DAP).

Whether it’s an upgraded room or a better quality facility, you can afford the care you deserve.

Before you give your kids money to buy a house or pay education expenses, be clear whether it’s a gift or a loan. If it’s a gift and you receive the Age Pension (or other benefits), you must declare it to Centrelink. The annual limit for gifting is $10,000 (or $30,000 over five years depending on your situation) – anything above that may affect your entitlements for up to five years.

If it’s a loan, it can still impact your pension entitlements. If you lend your children money instead of gifting it, that loan will be treated by Centrelink in the same way as most other investments, with a deemed rate of return – even if your kids weren’t expected to pay you interest or stop paying the interest you agreed.

Importantly, the impact of the loan on your Age Pension isn’t limited to five years, but for as long as the loan is outstanding.

It can also be advisable to provide your kids or grandkids a statutory declaration stating whether it’s a gift or a loan and, if it’s the latter, the terms. We require legal advice for all Household Loans; any terms agreed by you and the recipients should be documented as part of this process. In matters of money, emotions can get the better of us. Your Household Loan must be right for you as well as the right thing to do by your kids. Being clear and upfront will keep everyone secure.

While you should get advice from your accountant specific to your circumstances, there could be implications if you lend money, depending on whether interest is payable. If that’s the case, that interest could be considered investment income and therefore taxable in the hands of the lending parent.

Traditionally, parents helping their children have generally used three strategies, each of which has its downsides.

The most common strategy is for parents to raid their retirement savings, which can wreak havoc on future retirement plans. It might leave you with reduced income or mean your retirement nestegg is not there for you when you need it.

The second strategy is to be a mortgage co-borrower, which means you’re on the hook for mortgage repayments if your child misses them.

The third strategy is to be a guarantor on a mortgage, which can constrain your own ability to borrow and may put your property at risk if your child defaults on their mortgage repayments.

A Household Loan removes these risks because it doesn’t have to be repaid until you leave your home or it's sold. You could even agree a regular repayment schedule with your child; payments could be used to make interest-only repayments on your Household Loan, or agree a lump-sum repayment may pay off your Household Loan at a future date. There is no penalty for repayment of your Household Loan at any time.

A Household Loan enables you to help your children and grandchildren when they need it most and use your Household Capital to help the next generation build theirs.

>A Household Loan can provide a regular income stream, capital - or both! We provide flexibility and choice so you can use your money in a way that best enhances your long term retirement funding.

Taking the money only as you need it will minimise the interest accrued over the life of your loan.

Most equity release products are governed by the National Consumer Credit Protection Act 2009; these protections apply to our Household Loan and other reverse mortgage products.

1]   You remain the owner of your home and the title remains in your name. This gives you 100% exposure to any growth (or loss) in the value of your property, into the future.

2]   You can stay in your home as long as you want to – you have guaranteed occupancy. You cannot be removed from your home by the lender, nor be forced to sell your home at any time against your will, as long as you have met your obligations under the loan, as specified in the terms and conditions of the loan contract.

You do have a responsibility to remain living in your home, to ensure the council rates are paid, to keep it insured and to keep your home well maintained>

3]   You cannot end up owing us more than the house is worth. The “no negative equity guarantee” (NNEG) clause, introduced in 2012, means you are protected by law and cannot owe more than your home is worth, irrespective of the value of the property.

https://youtu.be/ALWkXRuVmBM

A home reversion scheme is quite different from a reverse mortgage; rather than being structured as a loan, it's a contract for the partial sale of your home. As such, you don't need to repay it, however the payment you receive for the portion of the home sold is generally significantly lower than the market value.

The benefits of a home reversion scheme include:

Each type of equity release product has a different cost structure, which is why it’s important to do your research and seek advice where required.

In terms of our Household Loan, we offer the lowest rate reverse mortgage product in Australia. The rate is currently 5.15%. More information about rates and expenses can be found here.

As well as having upsides, home reversion schemes also have a number of downsides, including:

>A Household Loan can provide a regular income stream, capital - or both! We provide flexibility and choice so you can use your money in a way that best enhances your long term retirement funding.

Taking the money only as you need it will minimise the interest accrued over the life of your loan.

Some of our customers are comfortable with a basic level of income – enough to keep on top of the bills, enjoy the occasional meal out and to be able to spoil the grandkids. Others look to enhance their lifestyle and enjoy a few more luxuries in their retirement years.

What’s on your wish list?

Our focus is on providing responsible, long term retirement funding. While a Household Loan can be used to fund travel as part of a broader retirement funding plan, we don't lend solely to fund holidays.

Yes. A Household Loan can be used to pay for your in-home care requirements, giving you greater choice and flexibility in terms of the services you can access.

There are so many ways a Household Loan can transform your retirement. Here are a just few:

• It can act boost your regular income so you can do more with retirement
• You can use it to top up super or other investments
• You can help your kids get onto the property ladder
• You can help pay your grandkids education expenses
• If you have a bank mortgage, you can repay it and improve your cash flow
• You can renovate or modify your home to get it retirement ready
• Comfortably cover medical costs, health insurance and other bills
• Pay for your choice of in-home or residential aged care

And there’s plenty more, too. Give us a call on 1300 622 100 and let’s discuss what we can do for you.

Watch our short video where Luke Rattigan, Household Capital's Chief Operations Officer explains how we make money. https://youtu.be/PDGW_Xcn-gc

If you are using home equity to top up your superannuation or other investments, you are required to get appropriate financial advice. This will help you determine how best to deploy your home equity to ensure improved long-term retirement funding. A financial adviser can also help structure your financial affairs to maximise entitlements to the Age Pension.

Household Capital requires you to get appropriate legal advice to ensure you understand your rights and obligations, and to confirm that a Household Loan is right for your circumstances.

A Household Loan is our innovative approach to borrowing against home equity for responsible, long-term, retirement funding. It is a type of reverse mortgage.

A reverse mortgage allows you to borrow money using the equity in your home as security. Interest is charged like any other loan, but you don’t need to make repayments while you live in your home. The loan must be repaid in full when you sell or leave your home or, in most cases, if you move into residential aged care.

Please see the Reverse Mortgage Information Statement for more information.

To find out more about reverse mortgages, including a reverse mortgage calculator to help you work out how much equity you may have in the future, visit the Australian Securities and Investments Commission’s free consumer website at www.moneysmart.gov.au.

A Household Loan is a type of reverse mortgage, so you benefit from key structural and legislative protections.

• You remain the owner of your home (and benefit from any increase in property value)

• You can stay in your home for as long as you want to.

• There is no requirement for you to make periodic loan repayments (although you can do so at any time without penalty). The loan becomes repayable when you leave your home.

• You cannot end up owing us more than your home is worth.

https://youtu.be/ALWkXRuVmBM

The Age Pension is an important source of income for many retired Australians. We can work with you to understand how a Household Loan can be used to preserve your pension entitlements and always recommend you speak to Centrelink to ensure your entitlements aren't affected.

Reverse mortgages are only available with variable rates; the main benefit of this is that you have flexible repayment options. A Household Loan may be repaid, in part or full, at any time without penalty.

The interest rate on a Household Loan is a variable rate of 5.15*% per annum, which is Australia’s lowest rate for a reverse mortgage or equity release product.

*The Comparison Rate based on a loan of $150,000 for 25 years is 5.21% per annum. Fees and charges may be payable. Note: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Reverse mortgage interest rates are generally higher than a standard mortgage because there is no obligation for borrowers to make repayments until the end of the loan.

It’s important that your home is as safe and comfortable as possible for your retirement years - and you can use a Household Loan to make appropriate renovations or modifications. That might mean installing a stairlift, handrails or a ramp for safety. It might mean a new kitchen, bathroom, or landscaping to make your garden less labour intensive. You can also hire a handyman to do those odd jobs, so there’s no risk of injury trying to DIY.

You can access your Household Loan as a lump sum, which you can then use to make the necessary renovations to make your home retirement ready.

Our focus is on providing responsible, long term retirement funding. While a Household Loan can be used to fund travel as part of a broader retirement funding plan, we don't lend solely to fund holidays.

There are so many ways a Household Loan can transform your retirement. Here are a just few:

• It can act boost your regular income so you can do more with retirement
• You can use it to top up super or other investments
• You can help your kids get onto the property ladder
• You can help pay your grandkids education expenses
• If you have a bank mortgage, you can repay it and improve your cash flow
• You can renovate or modify your home to get it retirement ready
• Comfortably cover medical costs, health insurance and other bills
• Pay for your choice of in-home or residential aged care

And there’s plenty more, too. Give us a call on 1300 622 100 and let’s discuss what we can do for you.

The Centrelink PLS reverse mortgage is enforceable against your property. When the last borrower leaves your home, or it is sold, you need to repay the principal and accrued interest to the government. The government can enforce the Centrelink PLS reverse mortgage against the departing owners or the estate upon death.

The maximum total loan available is a function of your age, the equity you have in your home and the value of your property. This limitation exists so you don’t end up owing more than your home is worth.

The maximum income available - combined Age Pension and PLS income stream to 150% of the Age Pension rate per annum; this currently corresponds to:

• a maximum $36,121.80 per annum for singles
• a maximum $54,451.80 for couples.

Individual amounts are dependent on whether applicants receive a full or part pension.

Income received via the Centrelink PLS reverse mortgage may be reduced or ceased in the future if the value of your home drops.

The Centrelink PLS reverse mortgage interest rate is currently 4.50% effective 01 January 2020, down from 5.25%. The rate is set by the Minister for Social Services without reference to RBA rates – until January's change, the rate had remained static since 1997.

While there are no establishment fees or monthly account fees, Centrelink may charge costs including legal fees. These costs are determined once the loan application is made and can either be paid immediately or added to the loan balance.

Learn about our Household Loan interest rates.

Launched in 1985, the PLS aimed to assist ‘assets tested’ age pensioners. It was expanded in 1997 to include income-tested age pensioners. Over the first 30 years of the program, the Centrelink Pension Loans Scheme reverse mortgage met the needs of a very small number of retired Australians, primarily rural farm owners.

The scheme was changed again from 1 July 2019 to extend eligibility to a broader range of pensioners of Age Pension age, including those currently receiving the maximum rate Age Pension.

The PLS allows you to borrow up to 150% - or 1.5 times - the maximum Age Pension, paid fortnightly.

There’s a range of eligibility criteria to qualify for the Centrelink PLS reverse mortgage. These include:

• You must be of Age Pension age
• You must qualify for or receive an eligible payment; this includes the Age Pension, disability support pension and widow’s pension
• You must own real estate in Australia with enough equity to secure the loan
• You must have adequate insurance covering the secured real estate
• You must not be bankrupt or subject to a personal insolvency agreement.

While Centrelink PLS reverse mortgages do provide occupancy and No Negative Equity Guarantees, Centrelink officers who administer Centrelink PLS reverse mortgages are not subject to responsible lending laws.

Banks are rarely willing to help retirees refinance a mortgage and we’re often asked whether we can help older Australians refinance a home loan. The answer is yes, although as with all loans, terms and conditions apply.

Our Household Loan can be used to refinance an existing bank mortgage and has three key benefits for retirees over a traditional bank mortgage:

• Improved retirement funding – as you don’t have to make regular repayments, the money you were using to service your loan can instead be used to fund your retirement
• Interest payment flexibility – you can choose to make regular interest repayments, however, there is no obligation to do so
• Guaranteed occupancy – whether you choose to make repayments or not, you have guaranteed occupancy of your home until you choose to leave it. There is no risk of foreclosure for missing a payment.

Home ownership and the family home is a strong part of the Australian identity, one that doesn't change when you retire. Home is where you’ve raised your family, created memories and established your community.

Until recently, most retirees faced with unserviceable mortgage debt felt they had no option but to sell their home. This isn’t an ideal option for everyone – appropriate housing isn’t always available in the right area and most people want to stay in their community.

Downsizing into a smaller home or unit, or even a retirement village, can result in disruption and dislocation and doesn’t always deliver a financial advantage.

Using a Household Loan, it is possible to refinance a mortgage in retirement without needing to downsize.

If you’re going to refinance your mortgage, whether with a traditional bank mortgage or with a Household Loan, you need to consider the following:

• Do you want to increase the retirement funding available to you?
• Do you want to be able to pay off the loan at any time without penalty?
• Do you want to be able to make interest-only repayments?
• Do you want flexibility?
• Do you want guaranteed occupancy?

You can refinance an existing home loan by using your home equity, the savings in your home. This frees up your cash flow to improve your longer-term retirement funding. You can choose to make interest repayments each month or repay the loan when you sell or leave your home. Consumer protections, such as guaranteed lifetime occupancy, are part and parcel of refinancing with a Household Loan.

Reverse mortgages are governed by the National Consumer Credit Protection Act 2009; these protections apply to our Household Loan as well as other reverse mortgage products.

1]   You remain the owner of your home and the title remains in your name. This gives you 100% exposure to any growth (or loss) in the value of your property, into the future.

2]   You have guaranteed lifetime occupancy. You cannot be removed from your home by the lender, nor be forced to sell your home at any time against your will, as long as you have met your obligations under the loan, as specified in the terms and conditions of the loan contract.

You do have a responsibility to remain living in your home, to ensure the council rates are paid, to keep it insured and to keep your home well maintained.

3]   You cannot end up owing us more than the house is worth. The “no negative equity guarantee” (NNEG) clause, introduced in 2012, means you are protected by law and cannot owe more than your home is worth, irrespective of the value of the property. https://youtu.be/ALWkXRuVmBM

Your loan is generally repaid from the future sale of your home. This may occur if you downsize later in retirement or you move into residential aged care. Alternatively, the loan will be paid from the proceeds of your estate.

Of course, if you are able to repay the loan earlier, you can do so without penalty.

Our customers have approached us with a diverse range of needs. These include:

• Setting up a regular income facility
• Refinancing an existing mortgage
• Renovating or modifying their home to ensure it’s retirement ready
• Covering an unexpected medical expense
• Buying a new car
• Helping children or grandchildren buy their first home
• Funding in-home care expenses
• Funding the transition to residential aged care.

We find many of our customers simply like the security that comes from having a contingency fund for those unexpected expenses that can crop up from time to time.

A number of banks provide lines of credit or home equity loans that allow homeowners to access the wealth built up in their property.

However, getting credit from the banks has become tougher for retirees since the 2018 Royal Commission into the banking sector. Any form of credit has become less available to retirees who may not have the income to demonstrate they can meet the required repayments.

The regular repayments needed to service a home equity loan or line of credit are likely to reduce your cash flow and therefore your retirement income. Each month, you have to find the funds to satisfy the bank. Many retired Australians tell us they feel insecure knowing their home is subject to repossession in the event being unable to meet repayments.

With a reverse mortgage, you don’t need to make regular repayments, although you can choose to do so. And whatever choice you make, you have guaranteed lifetime occupancy – you can stay in your home for as long as you choose.

The key benefit a reverse mortgage is to improve your long term retirement funding. This, in turn, enables you to:

• Increase your retirement income
• Improve your retirement lifestyle
• Remain living in your own home
• Look forward with confidence

Most importantly, a reverse mortgage allows you to enjoy the retirement you’ve worked hard for.

The purpose of taking out a reverse mortgage loan is to improve your long term retirement funding; it enables you to access the savings in your home without needing to sell it. That way, your home can be both the best place to live and the right way to fund your retirement. See how our reverse mortgage, the Household Loan, could improve your retirement.

The purpose of a Household Loan is to take care of your long-term retirement funding needs. Using it to top up your super or other investments can extend the longevity of the income stream generated by those investments. Customers using a Household Loan for this purpose are required to get independent financial advice.  

Many retirees rely on an income stream from super and the Age Pension to carry them through retirement. A small super balance, even when supplemented with the Age Pension, may not provide adequate retirement funding, denying retirees the comfortable retirement they’ve worked towards. Some retirees may believe the only solution is to downsize.

A house is made of brick and mortar, but a home is full of memories. Downsizing doesn’t just mean a smaller house, it can mean losing your community too. By topping up your super, you can improve your retirement income and look forward with confidence. A Household Loan can keep you where you belong

— in your own home.

Some retirees have been able to build up an investment portfolio over the years to provide a source of capital and income. We recognise that most investments go through peaks and troughs. When they do well, an investment portfolio can be a major source of retirement income. In a market downturn, you may prefer not to draw on a diminishing pool of capital as its ability to generate capital over the longer term will be diminished.

A Household Loan can help in two ways. It can be used to supplement your income during market downturns; this avoids further impairment of your investment portfolio and allows it to recover. Your household capital can also be used to add to your portfolio, to ensure it continues to meet your long-term retirement needs and provide you with choice and flexibility in retirement.