The Centrelink Reverse Mortgage Scheme, now called the Home Equity Access Scheme (HEAS), allows Australian seniors to supplement their retirement income by borrowing against their home equity. Available to individuals of pension age or those eligible for certain government benefits, the scheme provides regular payments or lump sums while the homeowner continues to live in their property.
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Key Features of the Scheme
- Eligibility: To qualify, individuals must be of pension age and own property in Australia. Both homeowners and non-homeowners may apply if they meet the asset and income test thresholds.
- Payments: Participants can receive fortnightly payments or a lump sum, depending on their needs. The amount available is based on the value of the home and the borrower’s age. The older the individual, the higher the percentage of their home value they can access.
- Loan Repayment: No repayments are required while the borrower lives in the home. The loan, including interest, is repaid when the home is sold, or the borrower passes away.
- Interest Rate: In 2024, the HEAS interest rate is around 3.95% per annum, lower than commercial reverse mortgage rates. The interest compounds, meaning it is added to the loan balance each fortnight.
- Flexibility: Borrowers can change the amount they receive or pause payments as needed. They can also repay the loan earlier without penalties.
Benefits of the Home Equity Access Scheme
- Income Supplementation: Helps retirees maintain their living standards by providing a steady income in addition to their pension or other benefits.
- Government-backed: The scheme is supported by the Australian government, ensuring security and stability for participants.
- Retain Home Ownership: Participants retain full ownership of their home while accessing its equity.
Risks and Considerations
- Reduced Inheritance: Since the loan is repaid from the home’s sale proceeds, there may be less equity left for heirs.
- Loan Growth: Compounding interest can result in the loan growing substantially over time, though the scheme guarantees that homeowners won’t owe more than the value of their home.
- Asset Impact: The funds received under the HEAS may impact eligibility for other government benefits.
Application Process
To apply, individuals can visit Centrelink or use the myGov online portal. Applicants will need to provide documentation about their property and finances and receive an estimate of how much equity they can access. Financial advice is recommended to ensure that the HEAS is suitable for each applicant’s circumstances.
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The Centrelink Reverse Mortgage Scheme (HEAS) is a viable option for older Australians seeking additional retirement income without selling their homes. With low interest rates and flexible repayment terms, it provides a government-backed solution for financial stability in later life. However, it’s essential to consider the long-term impact on home equity and inheritance before proceeding.