Lump sums confirmed for HEAS

lump sum home equity

Changes to the Home Equity Access Scheme will increase its appeal to retirees and provide more flexibility in using capital tied up in residential property.

The availability of lump sum payments via the federal government-run Home Equity Access Scheme (HEAS) with a no negative equity guarantee has been confirmed and will boost the uptake of the program, according to an advisory firm.

Earlier in the month selfmanagedsuper had reported lump sum payments would be included in the scheme in the immediate future.

Pension Boost chief executive Paul Rogan said: “The Home Equity Access Scheme option for retired Australian homeowners will blossom under these 1 July changes.

“This change will increase flexibility and utility for participants by providing a new way to use the scheme to meet their living expenses.

“Supplementing retirement income – age pensioners and self-directed retirees alike – is an issue for many senior Australians, particularly given the current cost-of-living pressures they face.”

Rogan highlighted HEAS participants will have the option of accessing some of their scheme payments as an upfront lump sum advance rather than in regular payments throughout the year.

The maximum advance allowed has been capped at 50 per cent of the maximum annual rate of the age pension, which is $19,354 for couples and $12,838 for singles. Participants have been guaranteed two advances each year, but Rogan warned the second advance will be reduced by the value of the first.

“Any advances taken will reduce the maximum fortnightly scheme payment a recipient can receive over the next 26 fortnights,” he said.

“These conditions also mean participants choosing to receive advance payments under the scheme will not be able to receive more overall than if they had chosen to receive regular fortnightly payments.”

He advised scheme participants the existing age-based loan-to-value limits will still apply when determining the maximum advance amount available, but could result in less than the maximum allowable being provided if they are approaching their maximum loan amount.

Participants have been given a no negative equity guarantee, which will reduce the debt to the government if their home has been sold for a price lower than their scheme loan balance, he noted.

“This has been one of the major advocacy reforms Pension Boost had been seeking and so we are very delighted to see that this important protection for seniors is now available for all HEAS participants and aligns the scheme with reverse mortgage regulation applying to commercial providers,” he said.

The government previously announced the rebranded scheme has lowered interest rates to 3.95 per cent from 4.5 per cent and in doing so become one of the most competitive reverse mortgage options in Australia.

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