The Home Equity Access Scheme (HEAS) is a government-backed reverse mortgage. It allows eligible older Australians to borrow against their home’s equity to help cover Support at Home contributions. This scheme is not a bank loan, and it includes a negative equity guarantee to protect your property’s value. The Home Equity Access Scheme suits some retirees, but you should seek independent financial advice to ensure it meets your specific needs.
Key Takeaways
- The Home Equity Access Scheme (HEAS) is a federal government reverse mortgage for people of Age Pension age (67+) who own Australian real estate.
- You don’t need to receive the Age Pension to qualify, so it can suit self-funded retirees too.
- Support at Home involves co-contributions of 5% to 50% for independence services and 17.5% to 80% for everyday living services, with no contribution for clinical care.
- HEAS currently charges a competitive interest rate of 3.95% and includes a negative equity guarantee.
- Borrowing against home equity reduces future equity, so it should be weighed against your long-term care needs.
Using the Home Equity Access Scheme to Pay for Support at Home
For many older Australians, the family home is their greatest asset, but it doesn’t help much when it comes to paying the weekly cost of aged care.
Under the Support at Home program, you need to contribute towards the cost of your independence and everyday living services. While these contributions are generally modest compared to the cost of residential aged care, they can still place pressure on retirees living on a fixed income.
But you don’t necessarily have to sell your home to access the wealth tied up in it.
What Is the Home Equity Access Scheme?
The Home Equity Access Scheme (HEAS) is a federal government reverse mortgage that allows eligible senior Australians to borrow against the equity in their home.
Unlike a traditional loan, there are no regular repayments required. Instead, the loan, together with the interest that accrues, is normally repaid when you sell the home or from your estate. Of course, you can choose to pay it off at any time.
The scheme is administered by Services Australia and is available to people of Age Pension age (67+) who own Australian real estate. You don’t need to be receiving the Age Pension to qualify, making it a potential option for pensioners and self-funded retirees.
How Could It Help Pay for Care?
Under Support at Home, you need to make co-contributions based on your assets and income and the type of services you receive. There is no contribution towards clinical care, a contribution of between 5% and 50% towards independence services and a contribution of between 17.5% and 80% towards everyday living services.
Many retirees are living on a fixed income, which can make finding the money for the Support at Home contributions challenging.
The Home Equity Access Scheme allows homeowners to convert some of the value locked up in their home into regular payments or, in some circumstances, a lump sum. Those funds can be used to pay the Support at Home contributions so you can continue living in your home while accessing the care you need.
How Much Can You Borrow?
The amount you can borrow depends on several factors, including your age, the value of your home and whether you already receive the Age Pension.
The maximum payment is equal to 150% of the Age Pension which works out to be $1,800 per fortnight for singles or $2,715 per fortnight for couples. Any amount you receive as an Age Pension reduces the maximum payment so if you are a self-funded retiree this is the maximum payment. But if you are receiving the full Age Pension the most you can borrow is around $600 per fortnight for singles or $905 per fortnight for couples
It is possible to use the Home Equity Access Scheme to access a lump sum, known as an advance payment. The advance payment is up to 50% of the maximum applicable pension rate in any 26-fortnight period. For people eligible for the Age Pension this means you could access approximately $15,600 for singles, and up to $23,535 for couples as a lump sum payment. If you take the full amount as one advance payment, you may not be able to access a second advance payment until the end of the 26-fortnight period.
There is also a cap on the total loan amount you can have, known as the Maximum Loan Amount. Generally, the older you are, the more of the equity in your property that you can access because the loan is expected to be outstanding for a shorter period.
Is It Better Than a Bank Reverse Mortgage?
The Home Equity Access Scheme has a very competitive interest rate, currently 3.95%. Like other reverse mortgages it also includes a negative equity guarantee, meaning you can never owe more than the market value of your property when it is eventually sold.
However, it won’t suit everyone. Depending on how much money you need and how quickly you need access to it, a commercial reverse mortgage or another financing option may suit you better.
Things to Consider
Borrowing against your home means reducing the equity that will be available to you in the future. It is important to think about how much you need now and how your care needs may change in the future.
The Home Equity Access Scheme can be a valuable tool for people who want to remain at home when the need for aged care arises. It’s important to be aware that accessing all of the care and support you need at home will likely mean paying co-contributions towards a government funded package as well as paying for private care while you wait or to “top up” your package. It can place substantial pressure on your cash flow. The Home Equity Access Scheme is not a silver bullet, rather one of the options that can help, you should seek advice about your particular circumstances.
What To Do Next
Understanding how to fund Support at Home is an important part of planning for future care.
Aged Care Decisions can help you compare your home care options with a free, personalised Options Report. We’ll match you with suitable Support at Home providers based on your needs, location and preferences, while helping you understand what services may be available.
For a limited time, you’ll also receive a personalised Support at Home Costs Report to help you better understand potential aged care expenses and plan your budget.
Get your Free Provider Options Report and Support at Home Costs Report today.
FAQs
Who is eligible for the Home Equity Access Scheme?
You must be of Age Pension age, which is currently 67, and own Australian real estate. You don’t need to already receive the Age Pension, so both pensioners and self-funded retirees can apply.
How much can I receive through HEAS?
The maximum fortnightly payment is 150% of the Age Pension rate, up to $1,800 for singles or $2,715 for couples. Full pensioners can access up to around $600 for singles or $905 for couples, since existing pension payments reduce the maximum.
Can I get a lump sum instead of fortnightly payments?
Yes, HEAS allows an advance payment of up to 50% of the maximum applicable pension rate within any 26-fortnight period. Age Pension eligible singles could access around $15,600 and couples up to $23,535 as a lump sum.
Is HEAS safer than a bank reverse mortgage?
HEAS offers a competitive interest rate of 3.95% and includes a negative equity guarantee, so you never owe more than your home’s market value. It won’t suit every situation though, and a reverse mortgage may work better depending on your needs.
Does using HEAS affect my Support at Home contributions?
HEAS funds can be used to help cover co-contributions for independence and everyday living services under Support at Home. There’s no contribution required for clinical care, though contributions for other services vary based on assets and income.
What should I consider before using HEAS?
Borrowing against your home reduces the equity available to you later, so think carefully about future care needs. Seek advice about your particular circumstances before deciding, since HEAS is one option among several.
The information contained in this article is intended as general information only and does not constitute personal financial advice, legal advice or professional advice. While care has been taken to ensure the information is accurate and up to date at the time of publication, rules, rates and circumstances can change.
The information provided may not be suitable for your individual circumstances. Before making any decisions about financial matters you should seek advice from an appropriately qualified professional who can consider your personal situation.
