Loan types for older Australians
As Australia’s leading provider of reverse mortgages, we’re often asked about the types of loans available for Australians nearing, or in, retirement.
Here’s a summary of the loan types and how they differ from one another.
Here’s a summary of the loan types and how they differ from one another.
Reverse Mortgage
A reverse mortgage allows people over 55 to release their home equity to enjoy a more comfortable retirement.
Reverse mortgages are subject to the National Consumer Credit Protection Act (NCCPA). This means there are several borrower protections in place, provided the loan obligations are met, such as lifetime occupancy and a no negative equity guarantee.
Some lenders also offer an equity protection option which provides further peace of mind.
The amount someone can borrow is dependent on the youngest borrower’s age and the property value.
The reverse mortgage can be used for a range of purposes, such as debt consolidation, home improvements, living expenses, upgrading a car, travel, and in-home or aged care.
Features of the reverse mortgage usually include flexible payment options, such as an initial lump sum, regular payments, or a cash reserve to apply for future needs.
Interest is usually calculated daily and added to the loan monthly, with the loan only repayable once the borrower permanently leaves the home.
A reverse mortgage suits older Australians who need to release their home equity to enjoy a more comfortable retirement, whilst retaining ownership in their home.
Reverse mortgages are subject to the National Consumer Credit Protection Act (NCCPA). This means there are several borrower protections in place, provided the loan obligations are met, such as lifetime occupancy and a no negative equity guarantee.
Some lenders also offer an equity protection option which provides further peace of mind.
The amount someone can borrow is dependent on the youngest borrower’s age and the property value.
The reverse mortgage can be used for a range of purposes, such as debt consolidation, home improvements, living expenses, upgrading a car, travel, and in-home or aged care.
Features of the reverse mortgage usually include flexible payment options, such as an initial lump sum, regular payments, or a cash reserve to apply for future needs.
Interest is usually calculated daily and added to the loan monthly, with the loan only repayable once the borrower permanently leaves the home.
A reverse mortgage suits older Australians who need to release their home equity to enjoy a more comfortable retirement, whilst retaining ownership in their home.
Home Equity Access Scheme
The Home Equity Access Scheme (Scheme), offered by Centrelink, is like a reverse mortgage, in that it helps retirees release equity from their home without having to sell.
The Scheme allows eligible Australians to borrow up to 1.5 times their fortnightly aged pension, with the total amount borrowed over time calculated on the age component amount, as well as the value of their property.
Eligible Australians can request up to two lump sum payments per year at 50% of the age pension, with the difference between any lump sum payments and the maximum potential loan amount available made as fortnightly payments.
For more information, visit the Service’s Australia website.
The Scheme could suit eligible older Australians who require a smaller amount than could be made available via a reverse mortgage to assist with their retirement needs.
The Scheme allows eligible Australians to borrow up to 1.5 times their fortnightly aged pension, with the total amount borrowed over time calculated on the age component amount, as well as the value of their property.
Eligible Australians can request up to two lump sum payments per year at 50% of the age pension, with the difference between any lump sum payments and the maximum potential loan amount available made as fortnightly payments.
For more information, visit the Service’s Australia website.
The Scheme could suit eligible older Australians who require a smaller amount than could be made available via a reverse mortgage to assist with their retirement needs.
Home Reversion
Home reversion is where a homeowner agrees to sell a portion of their property in return for a lump sum payment. Any future growth in property value is shared with the provider based on the percentage agreed.
Depending on the provider’s terms, the payment received may be lower than its current market value.
A home reversion is considered a property transaction and isn’t subject to the National Consumer Credit Protection Act (NCCPA).
Home reversion could suit those wanting to access their home equity without accumulating any debt, or who don’t want a mortgage taken out over their home.
Depending on the provider’s terms, the payment received may be lower than its current market value.
A home reversion is considered a property transaction and isn’t subject to the National Consumer Credit Protection Act (NCCPA).
Home reversion could suit those wanting to access their home equity without accumulating any debt, or who don’t want a mortgage taken out over their home.
| Reverse Mortgage |
Home Equity Access Scheme |
Home Reversion |
|
| Type | Loan | Loan | Property transaction |
| Youngest age | 55 or older | 66.5 or 67 | 60 or older |
| Locations available | Capital cities, major regional cities and centres | Most locations | Limited availability |
| Amount |
|
Up to 1.5 times fortnightly age pension | Based on age and portion of home sold |
| Payment types |
|
|
Lump sum only |
| Repayment |
|
|
Not applicable |
| Consumer protections | Subject to NCCPA | Not subject to NCCPA. No negative equity guarantee included | Not subject to NCCPA |
An important decision
If you’d like to find out more about a Heartland Bank Reverse Mortgage, call us on 1300 889 338 or request a guide.