Reverse mortgages and the Home Equity Access Scheme

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Are you aged 60 years or older and experiencing financial stress, or wanting a more comfortable retirement?

If you own a home, you may be able to access much needed funds by releasing equity from your property.

Home Equity is the difference between the value of your home and the amount you still owe on your home loan. By releasing equity, you can access funds against your real estate while still owning and living on the property.

There are two main ways to access equity in your home: through a reverse mortgage or the Government’s Home Equity Access Scheme.

What is a Reverse Mortgage?

A reverse mortgage involves getting a home loan from a bank or lender, using your current home equity.

Reverse mortgages are usually designed for older Australians (60 years and older) wanting to supplement their income or pension, pay off debt or cover medical/hospital expenses. From the age of 60, the amount you can borrow increases each year, but the minimum amount is normally around $10,000.

How does it work?

Unlike a standard home loan, the borrower is not required to make regular repayments on the loan and instead, the loan and interest accrued is paid off when the home is sold, you move out of the home or it becomes a deceased estate.

The amount you can borrow depends on factors such as your age and home equity.

Note: As a reverse mortgage is usually given out by banks or lenders, the interest rates can be higher than usual.

You can apply for a reverse mortgage through a mortgage broker (like Aintree Group Finance!).

What is the Home Equity Access Scheme?

The Home Equity Access Scheme is the Australian Government’s version of a reverse mortgage.

But what does this exactly mean?

The scheme allows older Australians who are of Age Pension age and own real estate to get a tax-free loan from the Government, using their current home as security.

Interest will compound on the loan over time, but you will not be required to submit any repayments until you sell the house or the owner passes away. The loan amount will depend on if you currently get the pension or not, and you can choose to get payments fortnightly, in a lump sum or both.

You can calculate an estimate of your potential loan amount here. To apply, you will need to do so through Centrelink, however we encourage you to speak to our Aintree Group Wealth team for advice before you start.

Note: The interest rate is usually lower than that of a reverse mortgage, however the application process can take a lot longer.

Accessing and implementing reverse mortgages is complex so it’s important that you seek professional advice from a financial advisor before you make any decisions.

Contact our Aintree Group Wealth and Finance teams to discuss how a reverse mortgage can impact your individual circumstances and if it is beneficial in the long run.

Disclaimer: This is general advice only. For individual and personalised advice, we highly recommend that you seek out proper professional financial advice when dealing with your financial position.