Retirees who own their own home and need more money in retirement are now able to access the Home Equity Access Scheme, run through Services Australia. The scheme was previously known as the Pensions Loans Scheme but along with a new name, the fortnightly interest rate has been lowered to 3.95% per annum. To access the scheme, there is no need for an individual and/or their partner to be on the Age Pension, although certain other requirements need to be met. Loan payments under the scheme can be started and stopped at any time.
The Home Equity Access Scheme allows older Australian to get a voluntary non-taxable fortnightly loan at an interest rate of 3.95% per annum, which is a much lower rate than personal loans from various providers, which typically start from around 5% per annum. To access the loan, a retiree or their partner needs to meet the following requirements:
It should be noted that retirees can get a loan even if their income and assets mean that they wouldn’t normally get one of the qualifying pensions – they just need to be able to meet the eligibility rules. People who are on either the Pension Bonus Scheme or an Asset Hardship Payment may have affected eligibility for the scheme affected.
There are costs associated with starting and stopping the scheme – for example, Services Australia will place a charge or caveat on the property offered as security for the loan, and the retiree will need to pay the costs involved with registering and removing the charge or caveat. These costs will not need to be paid upfront and can be added to the loan balance, which can then be paid at any time.
When qualifying for the scheme, people can choose to get their loan payment each fortnight at either the maximum amount (which is 150% of the person’s maximum pension rate), a smaller percentage, or a fixed loan amount of their choosing. The loan amount will be automatically adjusted whenever the pension amount changes.
For individuals who do not receive the pension, the maximum amount under the Home Equity Access Scheme, $1,665.45 per fortnight, can be accessed.
Payments under the scheme will continue until the holder reaches their maximum loan amount (including interests and costs). This maximum loan amount depends on the person’s age, the age of their partner (if any), and the market value of the property offered as security. For example, for a single person aged 70 who has a home with a market value of $800,000, the maximum loan amount available under the scheme is $246,400.
The scheme is flexible, which means it’s possible to stop loan payments at any time and to make repayments at any time, but regular repayments are not required. Rather, recipients of the loan have the choice to wait to pay the loan, legal costs and accrued interest in full when they sell the property they’ve used as security. However, it should be noted that the longer the loan is held, the more interest will accrue.
Source: https://ministers.dss.gov.au/media-releases/7851
www.servicesaustralia.gov.au/home-equity-access-scheme
www.dva.gov.au/financial-support/income-support/support-when-you-cannot-work/pensions/home-equity-access-scheme