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How to release equity
from your home

As Australia’s leading reverse mortgage provider, Heartland is often asked about other forms of home equity release available in Australia, such as Home Reversion and the Federal Government’s Home Equity Access Scheme (previously known as the Pension Loans Scheme). Here’s a summary of how these equity release options differ from one another.

Reverse mortgages

A reverse mortgage is like a normal home loan that’s been designed for the needs of people in retirement. It can allow you to release the equity in your home without having to sell, helping you live a more comfortable retirement.

Importantly, reverse mortgages are subject to the National Consumer Credit Protection Act (NCCP), which means there are a number of borrower protections and safeguards in place, such as lifetime occupancy and a no negative equity guarantee. These protections may also allow you to take out an Equity Protection Option, offering you further assurance and peace of mind.

One of the key benefits to a reverse mortgage is flexibility, as you can tailor the loan to suit your retirement needs. There are many drawdown options to choose from (lump sum, regular advances for up to 10 years, or cash reserve ‘like a line of credit’) and your loan can be used for a range of purposes, such as consolidating debt, home improvements, day-to-day expenses, upgrading your car, traveling and in-home or residential aged care.

Interest is added to the loan monthly and is only repayable once you move permanently from your home. However, you are free to make repayments at any time.

A reverse mortgage is a great option for someone who would like flexibility with their funds, the ability to redraw voluntary repayments, and continue to fully own and live in their own home for as long as they choose.

Centrelink’s Home Equity Access Scheme (previously known as the Pension Loans Scheme)

The Federal Government’s Home Equity Access Scheme, offered by Centrelink, is similar to a reverse mortgage in that it helps retirees release equity from their homes. However, there is no requirement to follow the National Consumer Credit Protection Act (NCCP), meaning borrower protections are not compulsory requirements for the product.

The Home Equity Access Scheme is currently designed as an income supplement that allows you to borrow up to 1.5 times the maximum fortnightly age pension. The total amount you can borrow over time is calculated based on your age component amount, as well as the value of your property. It is important to note that if the age pension changes, so will your entitlements under the Home Equity Access Scheme. For current age pension figures, visit the Service’s Australia website.

As it stands now, the Home Equity Access Scheme can be a great option if you only require a regular income stream to help pay the bills. However, it may not be suitable for those who require larger sums to pay off something like a mortgage, credit card bill, new car, aged care deposits and much more. It also doesn’t offer much flexibility with regards to how and when you can access your funds – it is a regular fortnightly pension top-up only.

Changes from 1 July 2022

The Federal Government has announced some changes to the Home Equity Access Scheme from 1 July 2022. These include:

  • adding no negative equity guarantee protection;
  • up to two optional lump sum payments per year at 50% of the age pension;
  • on top of this, the difference between the lump sum and maximum potential loan can be paid as fortnightly instalments.

Home Reversion

A Home Reversion is different type of equity release where you agree to sell a portion of your property to a provider or investor in return for a lump sum payment, with any future growth in property value shared based on the percentages of ownership.

It is important to understand that the payment received is often much lower than the current market value. For example, you could sell 65% of the future value your home but only receive somewhere between 25% and 40% of the value up front, depending on your age.

Home Reversion is also considered a property transaction and is not subject to National Credit Consumer Protection Acts (NCCP). Protections in place are dependent on provider.

A Home Reversion can be a good option for those that want to access their home equity without accumulating any debt. However, there is limited availability based on location for this product compared to a reverse mortgage or the Pension Loans Scheme, which are both available in most locations.

Here is an outline of some of the key differences between these general products. This information may vary depending on the provider.

  Reverse mortgages (dependent on provider) Home Equity Access Scheme (previously known as the Pension Loans Scheme) Home Reversion
Type Loan Loan Selling a portion of your home
Age 55 or older* 66.5 or 67 years (age pension age depending on birthdate) 60 or older
Locations Available in all capital cities and major regional cities and centres Available in most locations Limited availability
Loan/payment amount Minimum - $5,000

Maximum - Unlimited

(based on age and property value only)
Up to 1.5 times fortnightly age pension Based on age and share amount you are looking to sell from your home
Payment types Lump sum

Income stream (monthly, quarterly, or annually)

Cash reserve (like a ‘line of credit’)

Or a combination of all three
Income stream (fortnightly only)

Up to two lump sums per year (from 1 July 2022)
Lump sum only
Loan repayments Not required until the end of the loan

Voluntary repayments can be made at any time

Must be repaid within 12 months of the borrower moving
permanently from
their home
Not required until the end of the loan

Voluntary repayments can be made at any time

Must be repaid when house is sold or within 14 weeks of the borrower passing away
Not applicable (Not a loan)
Consumer protections Subject to the National Consumer Credit Protection Act (NCCP) Not subject to the National Consumer Credit Protection Act (NCCP), but from 1 July 2022 have opted to add a no negative equity guarantee Not subject to the National Consumer Credit Protection Act (NCCP)

*With a Heartland Reverse Mortgage, where one borrower is aged 60 or over and has a partner between the ages of 55 and 59 you may be able to access a loan on your owner occupied home.

An important decision

When deciding between a reverse mortgage, the Home Equity Access Scheme and Home Reversion, one option may be more suitable for you than the others, depending on your situation and objectives.

We encourage everyone considering home equity release to do their own research, make use of the resources on our website, and speak to Centrelink, friends and family. Our customer care team are specialists in reverse mortgages and can also answer any questions you may have. Please feel free to call us on 1300 889 338 or email us at [email protected].

Information provided is accurate as at 1st January 2022 and may change from time to time.

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