If you’re an older Australian looking to supplement your retirement income, you might be interested in our Home Equity Access Scheme. This voluntary, non-taxable loan allows you to borrow against the equity in your Australian real estate.
If you’re a homeowner looking to supplement your retirement income, the Home Equity Access Scheme could be an option. This government initiative allows eligible retirees to use the equity in their homes as a source of income by borrowing against the property’s value.
Home Equity Access Scheme Explained
Under HEAS, you can choose how much you receive each fortnight, and your combined loan and eligible pension payments could be up to 1.5 times your maximum pension rate. The loan is non-taxable, and you don’t have to repay anything until you exit the scheme, either by paying off the loan or passing away.
Interest is accrued on the income received until the loan is paid off, with the current interest rate set by the government at 3.95% per year. You can stop receiving the HEAS income at any time, and if you sell your property, you can either transfer the loan to another property or repay the loan on the settlement date.
HEAS offers a No Negative Equity Guarantee. This means that if the borrower or their estate decides to sell the property and the sale proceeds are not enough to repay the loan, neither the borrower nor their estate will be liable for the shortfall. In other words, the borrower or their estate won’t owe more than the market value of their property.
HEAS Eligibility
To be eligible for HEAS, you must meet the following criteria:
Receive a Qualifying Pension
To be eligible for the Home Equity Access Scheme, you must receive one of the following pensions: Government Age Pension, Carer Payment, or Disability Support Pension. If you don’t receive a government pension, you may still be eligible if you meet the rules for a qualifying retirement but don’t receive a payment due to exceeding income or assets thresholds.
Meet Government Age Pension Age
You must be of Government Age Pension or older to apply for the Home Equity Access Scheme. The Age Pension age varies depending on your birthdate, and it is currently 66 years for both men and women.
Own Real Estate in Australia
You or your partner must own real estate in Australia to use as security for the loan. This real estate could be your home or an investment property. The property must be your primary residence or holiday home and not commercially used.
Have Appropriate Insurance
You need appropriate insurance covering the real estate you use as security for the loan. The insurance should cover the property’s value and protect against damage, theft, and other risks.
Not be Bankrupt or Subject to a Personal Insolvency Agreement
To be eligible for the Home Equity Access Scheme, you cannot be bankrupt or subject to a personal insolvency agreement. This requirement ensures you can repay the loan and avoid further financial difficulties.
Things to Note
- The Home Equity Access Scheme pays its beneficiaries every fortnight in the same way as the Age Pension. You may be eligible to receive up to 150% of the full Age Pension entitlement minus the amount of Age Pension you currently receive
- The Home Equity Access Scheme is a loan secured against your property. The loan amount increases every fortnight, including your payment and the interest on the outstanding balance
- You are only required to repay the Home Equity Access Scheme loan when you sell or vacate your property
To decide if HEAS is right for you, Services Australia offers a loan eligibility calculator and loan estimator. Speaking with a financial adviser to explore all your retirement funding options is also recommended.
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