How to Tap your Home Equity

I am aged 86 and was working until 2019 taking in international students, but now I have used all my savings and the only asset I have is my home. I have lived there for 48 years, and it is valued at about $6 million. Bendigo Bank and Household Capital are two places I have heard about that offer reverse mortgages, as well as the federal government’s Home Equity Access Scheme. What are some of my options to tap my home equity to generate some income? R.S.

Centrelink’s pension loans scheme was renamed the Home Equity Access Scheme (HEAS) at the beginning of the year, and this is likely to be your lowest-cost approach. It offers a fortnightly income stream of up to 150 per cent of the maximum age pension, with an interest rate of 3.95 per cent – although that may rise.

full single age pension of $987.60 a fortnight, or $25,678 a year, topped up with a further 50 per cent.

In your case, if you have used up all your savings, then you could apply for a HEAS loan to about $38,516 ($58,063 for a couple), secured against your home.

As a resident over age pension age (66.5), as you obviously are, you would qualify, even if you do not receive a pension. The loan is untaxed and does not count towards the pension means tests, unless cash builds up and starts earning interest.

From July 1, you would be able to take a lump sum of up to half the annual rate of pension, although this reduces your fortnightly loan payments over the following year.

HEAS is a mortgage, so there is a lot of paperwork to do, including property title, insurance, and identification.

Your best bet might be to get a list all the papers required to take part in HEAS from Service Australia’s website, then make an appointment (call 132 300) to go into a Centrelink office. You may be able to apply online through MyGov but, unless you are already getting a pension, you may still have to identify yourself.

Alternatively, most financial advisers could help you to navigate the process.

Another alternative to HEAS is that you could downsize your home and, with $6 million, move into a posh retirement complex and still have millions to spare.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. All letters answered. Help lines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00.