Home Equity Access Scheme (formerly known as the Pension Loans Scheme)

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From 1 January 2022 the Pension Loan Scheme is being renamed the Home Equity Access Scheme

This page explains what the Home Equity Access Scheme is, what the eligibility criteria are and how you can apply for a loan.

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What is the Home Equity Access Scheme?

The Home Equity Access Scheme is a voluntary reverse equity mortgage that offers older Australians a fortnightly income stream to supplement their retirement income. The payments may be made for a short period of time while your income and assets are being rearranged or may be made for an indefinite period.

A loan under the Home Equity Access Scheme can be repaid in full or part at any time. The full amount of the loan plus interest owed at the time of the death of the person will be recovered from the person’s estate.

From 1 January 2022, the interest rate for the Home Equity Access Scheme will be reduced to 3.95 per cent per annum.

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Who is eligible?

To be eligible for a loan under the Home Equity Access Scheme you need to meet the following criteria:

  • be a veteran, or the partner of a veteran, who has reached the applicable pension age and is eligible for service pension;

or

  • be a war widow/widower who has reached qualifying age and is eligible for ISS; and
  • not be a bankrupt or subject to a personal insolvency agreement, and
  • have sufficient property in Australia that you can offer as security for the loan.
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What is pension age?

If you are a veteran who has qualifying service or a war widow or widower, you may be eligible under the Home Equity Access Scheme if you are 60 years of age. This is termed pension age for veterans, or qualifying age for war widows and widowers.

If you are the partner of a veteran, you may be eligible under the Home Equity Access Scheme when you reach pension age, as per the table below:

Male and female non-veterans
If your date of birth is on or between: Then your pension age is:
Before 1 July 1952 65 years
1 July 1952 to 31 December 1953 65 years and 6 months
1 January 1954 to 30 June 1955 66 years
1 July 1955 to 31 December 1956 66 years and 6 months
On or after 1 January 1957 67 years
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Working out the pension rate

The amount of pension you receive depends on your income and assets. The pension is calculated under two separate tests — the income test and the assets test. The test paying the lower rate of pension is the one that is applied.

If you are paid no pension you are either ineligible or not payable. If you are not payable, it is because of the effect of either the income test or the assets test. Even if you are not payable you may still be eligible for Home Equity Access Scheme from DVA. If you are ineligible for a pension from DVA you may still be eligible from the Department of Human Services.

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How much can I be paid each fortnight under the Home Equity Access Scheme?

Under the Home Equity Access Scheme you can receive fortnightly payments which top up your current pension amount (whether you receive some pension or nil pension) to 150% of the maximum rate of pension which applies to your circumstances. This rate includes allowances such as rent assistance. If you do not wish to receive the maximum amount of loan, you can nominate a lower amount.

The loan amount each fortnight is the difference between the pension you would normally receive (if any) and the amount you receive when your pension has been increased under the Home Equity Access Scheme.

Example 1: John is a single pensioner who currently receives $120 service pension per fortnight. The maximum loan he can be paid each fortnight under the Home Equity Access Scheme is as follows:

150% of the maximum single rate service pension $1,481.40 
Less service pension John receives $120.00
Equals amount of loan payable $1,361.40

John can receive a loan of up to $1,361.40 per fortnight. This is in addition to the $120.00 of service pension he already receives.

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What is the total amount of loan I can receive?

The total amount of loan you can receive depends on the value of the property which you offer as security for the loan, the equity you wish to keep in the property and your age at the time the loan is granted. You may offer the whole value of your property as security for the loan, or you may wish to keep some equity in the property. The amount of equity you wish to keep in the property is called the nominated amount. This is the amount you would like kept aside from the total value of the secured property. The nominated amount is not included when we decide your total loan amount. For example, if your property is valued at $150,000 and you request that $90,000 be left as the nominated amount, $60,000 is used in deciding what your total loan amount can be.

When your total loan amount is reached, payments of the loan to you will stop. You will be asked if you wish to change the value of your guaranteed amount or rearrange your financial assets in order to continue in the Home Equity Access Scheme.

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Can I take a part of my loan as a lump sum?

From 1 July 2022, subject to passage of legislation, participants in the Scheme will be able to bring forward a portion of their fortnightly loan payments as a lump sum advance. These lump sum advances will be capped at 50 per cent of the annual rate of Age Pension, and any advance taken will reduce the fortnightly loan amount a person can receive over the following 12 months.

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What can I use as security for the loan?

You can offer real estate which you and/or your partner own in Australia as security for the loan. This includes the home in which you live. If your property is owned with someone other than your partner, jointly or as tenants in common, DVA may not accept the property as security for the loan. When you apply for the loan, the property which you choose to be used as security is valued on behalf of DVA. If the loan is approved, the property will be valued annually during the life of the loan.

A debt to the Commonwealth is registered against the property or properties which you offer as security for the loan. This is done by the Commonwealth placing a charge on the property. The cost of placing the charge must be paid by you. This may be paid up front or can be added to the loan amount.

From 1 July 2022, subject to the passage of legislation, a No Negative Equity Guarantee will be introduced to the Scheme, ensuring no participant will need to repay more than the equity they hold in the property they used to secure their loan.

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How is interest calculated on the loan?

Interest is calculated on a fortnightly basis each pension pay day. Interest is calculated on the amount of loan payments you have received plus previously accrued interest, less any repayments made.

The interest rate is set by the Minister for the Department of Social Services and is published in the Australian Government Gazette. From 1 January 2022, the interest rate for the Home Equity Access Scheme will be reduced to 3.95 per cent per annum.

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Will the loan be recovered when I die?

If there is an outstanding loan at the time of your death, the amount will usually be recovered from your estate. Interest will continue to accrue until the loan is repaid.

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What happens if I have a surviving partner?

If your spouse is also eligible for loan payments and wishes to keep receiving them, payments will continue and recovery of the loan may be deferred until their death. On their death the loan is recovered from the estate.

If your surviving partner is under pension age, the loan debt may be recovered after the bereavement period. If your surviving partner has reached pension age and is using the property which secured the loan, the debt may not be recovered until after their death.

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Am I eligible for a Pensioner Concession Card or treatment benefits?

If you are entitled to any payment under the normal income and assets tests, you are eligible to receive a Pensioner Concession Card. However, if the whole amount of pension you receive is under the Home Equity Access Scheme, you will not be eligible for a Pensioner Concession Card.

You are only eligible for treatment benefits if you qualify under the normal income and assets tests or as a disability pensioner (see Gold Veteran Card). Payments made under the Home Equity Access Scheme do not, of themselves, entitle you to treatment.

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Is the loan subject to income tax?

Any payments you receive under the Home Equity Access Scheme are not subject to income tax.

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How do I apply for a loan?

To apply for a loan under the Home Equity Access Scheme you need to complete the form D2662 Pension Loans Application.

If you apply for a loan under the Home Equity Access Scheme you may be interviewed by a DVA officer to ensure that you are aware of the terms and conditions associated with payment of the loan and its recovery

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