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Need more money in retirement?

Date: 11 February 2022

If you’re a retiree and the current rise in cost of living and inflationary pressures are starting to bite, don’t turn to high interest loans, if you meet certain eligibility criteria, you may be able to access the Home Equity Access Scheme (previously known as the Pension Loans Scheme) run by the government through Services Australia.

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 that start from around 5% per annum. To access the loan, you or your partner need to meet the following requirements:

  • are at Age Pension age or older;
  • get or are eligible to get a qualifying pension (ie Age Pension, Carer Payment or Disability Support Pension);
  • own real estate in Australia that you can use as security for the loan;
  • have adequate and appropriate insurance covering the real estate offered as security; and
  • are not bankrupt or subject to a personal insolvency agreement.

It should be noted that you can get a loan even if your income and assets mean that you wouldn’t normally get one of the qualifying pensions, you just need to be able to meet the eligibility rules. In addition, individuals that are on either the Pension Bonus Scheme or an Asset Hardship Payment may have their eligibility to 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 you’ll 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 your loan balance which you can then pay at any time.

If you qualify for the scheme, you can choose to get your loan payment each fortnight at either the maximum amount which is 150% of your maximum pension rate, a smaller percentage, or a fixed loan amount of your choosing. The loan amount will be automatically adjusted whenever your pension amount changes.

For individuals that do not receive the pension, the maximum amount under the Home Equity Access Scheme can be accessed, which is $1,665.45 per fortnight.

Payments under the scheme will continue until your reach your maximum loan amount (including interests and costs). This maximum loan amount depends on your age, the age of your partner (if any), and the market value of the property you’re offering as security. For example, if you’re a single person who is 70 and the market value of your home is $800,000, the maximum loan amount you can get under the Scheme is $246,400.

The Scheme is flexible, which means you can stop loan payments at any time, and you are able to make repayments at any time, but you do not have to. 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 used as security. However, it should be noted that the longer you have the loan, the more interest you’ll need to pay.

Want to access the scheme?

If you’re retired and want to enhance your standard of living by using the Home Equity Access Scheme, we can help you work out whether you are eligible and the maximum loan amount you can get under the Scheme. Contact us today for more information and expert help. Here’s how you can contact us: enquiries@rm.net.au

**The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

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