The rising cost of living has heavily impacted pensioners and self-funded retirees, but a government initiative, called Home Equity Access Scheme, could boost their income.
The Home Equity Access Scheme, previously known as the Pension Loans Scheme, enables older Australians to augment their retirement income, allowing them to access the equity in their home as non-taxable fortnightly payments with a 3.95% interest.
Starting in July, recipients will also be able to apply for a lump-sum payment, which is currently only offered by private reverse mortgage lenders, and can make repayments whenever they like without having to pay it back until the property is sold, 9news reported.
Just like current reverse mortgages, the scheme from July 1 will now protect owners from borrowing more than the home’s value.
“People can be confident that [if] they do use home equity release, and the home is eventually sold, there’s no further debt to pay down the track,” Brendan Coates from Grattan Institute told 9news.
Australian homeowners who are at least 66 years and six months old can access the scheme, even with a mortgage on their home.
Despite 1.9 million pensioners currently owning a property, only 5,100 people are taking advantage of the scheme.