Lump sum advance payments are now allowed under the Federal Government’s Home Equity Access Scheme (HEAS). This change will increase flexibility and utility for participants by providing a new way to use the scheme to meet their living expenses. HEAS participants will have the option of accessing a portion of their scheme payments, normally received each fortnight, as a modest up-front lump sum advance.
The changes include:
Pension Boost CEO Paul Rogan says HEAS scheme will grow with the changes.
“The HEAS option for retired Australian homeowners will blossom under these 1 July changes. 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.
The maximum advance will be capped at 50 per cent of the maximum annual (26 fortnights) rate of age pension. Currently that is up to $19,354 for couples and $12,838 for singles.
Participants will be able to access up to two advances in any 26 fortnight period, however the amount available as a second advance will be reduced by the value of the first advance. This ensures no more than the capped 50 per cent amount can be taken as advance payments.
The existing age-based loan-to-value limits will continue to apply when determining the maximum advance amount available to a participant. This means the actual advance a participant is eligible to receive may be less than the maximum allowable advance described above, if the participant is approaching their Maximum Loan Amount.
Any advances taken will reduce the maximum fortnightly Scheme payment a recipient can receive over the next 26 fortnights.
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.
The full Bill is available here.
A No Negative Equity Guarantee will apply to HEAS loans
An important senior consumer protection has been the introduction of a No Negative Equity Guarantee for all HEAS borrowers. From 1 July, HEAS borrowers (or their estates) will no longer be exposed to the risk of owing the Government a debt if their home is sold at price below their HEAS loan balance.
“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,” said Paul Rogan.