Australians aged 60 and over collectively own around $3 trillion worth of residential property equity, yet less than 1% has been converted into retirement income. Two main pathways exist to unlock this wealth: the government home equity access scheme (HEAS) and private reverse mortgages. The difference between them is substantial. HEAS allows eligible retirees to borrow at 3.95%, whereas private lenders charge 8% to 10%. For instance, on a $150,000 draw over 15 years, that rate gap means the difference between owing roughly $268,000 or $510,000. This guide compares both options to help retirees determine which pathway best suits their financial circumstances and long-term financial protection.
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Understanding the Two Home Equity Options in 2026
What Is the Government Home Equity Access Scheme (HEAS)?
The home equity access scheme allows eligible older Australians to access equity in their home through an Australian Government loan. Previously known as the Pension Loans Scheme, participation remains voluntary. The scheme serves pensioners and non-pensioners aged over the Age Pension age and requires participants to offer Australian real estate they own or co-own as security. A person must have their name on the property title for the land to qualify.
Participants can choose to receive fortnightly payments that supplement their their regular income or request a lump-sum advance. The government home equity access scheme loan structure operates on a 150% maximum pension rate basis. For those receiving the maximum pension rate, the scheme provides an additional 50% of that rate as a loan. Retirees who receive no pension can access the full 150% as a loan payment. Notably, participating in the scheme does not affect existing pension entitlements, and only the top-up amount counts as a loan.
Borrowers can access up to 2 lump-sum advances in any 26-week period. The current interest rate sits at 3.95% per annum. This rate compounds fortnightly on the loan balance until the loan is fully repaid. The loan accrues as a debt secured against the participant’s nominated Australian real estate. Services Australia administers the programme, offering online calculators for eligibility checks and borrowing estimates. Payments received through the HEAS remain non-taxable and do not count towards pension income tests.
What Is a Private Reverse Mortgage?
A reverse mortgage allows homeowners to borrow money using their home equity as collateral without having to make regular payments while living in the home. Private lenders offer these products to Australians typically aged 60 or older, though some lenders accept applicants aged 55 or older. Borrowers retain ownership of the title and can stay in their home for life or until they choose to sell or relocate.
Interest on the loan compounds over time, increasing the borrowed amount. Interest rates on private reverse mortgages typically range between 8% and 10% per annum with reputable providers. The compounding occurs monthly, and rates sit higher than standard home loan rates. When the borrower sells the home, relocates permanently, or the deceased estate sells the property, the whole sum, including interest and fees, is repaid.
Private reverse mortgages offer flexible drawdown options. Borrowers can take funds as a lump sum, make regular advances on a monthly or quarterly basis, or set up a cash reserve that serves as a line of credit for future draws. The amount accessible depends on age and home value, with lenders applying age-based loan-to-value ratio limits. At age 60, borrowers typically access 15% to 20% of the home’s value, with the amount increasing by approximately 1% for each additional year.
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Key Structural Differences Between HEAS and Private Products
The cost disparity between the two options creates the most significant structural difference. Whereas HEAS charges 3.95% per annum, private reverse mortgages impose rates around 8.5% to 9% per annum. This interest differential substantially affects long-term debt accumulation.
Eligibility requirements differ markedly. HEAS strictly requires participants to reach the Age Pension age, currently 67 for most Australians. In contrast, private lenders approve applications from age 60, with limited options available from 55. HEAS applicants must either receive a qualifying pension or be eligible for one, even if their payment rate is zero due to means testing. Private reverse mortgages impose no pension-related requirements.
Access flexibility separates the two products. Private reverse mortgages provide immediate approval for a pool of funds that borrowers control, whether taken immediately or via a line of credit. HEAS functions as an ongoing service where Centrelink manages disbursements according to fixed rules: fortnightly payments or two lump sums annually, within pension-based limits. Maximum loan sizes also vary, with private products generally providing larger lump sums for substantial equity access.
Fee structures contrast sharply. HEAS imposes no establishment or monthly fees. Private reverse mortgages include application fees, valuation costs, legal expenses and ongoing charges. Processing speed differs, too: private loans typically settle within weeks, whereas HEAS applications can take several months through Centrelink.
Eligibility Requirements and Access Criteria
HEAS Eligibility: Age Pension Requirements
Accessing the government home equity access scheme requires participants to meet the Age Pension age on the date they claim. For most Australians, that threshold currently sits at 67 years. Applicants under the Age Pension age can still qualify if their partner has reached that age and they receive either Carer Payment or Disability Support Pension. Those not already receiving these payments must apply for them prior to submitting a HEAS application.
Eligibility extends beyond current pensioners. The HEAS scheme accepts applications from individuals eligible for qualifying pensions, even when their payment rate is zero due to means testing. This provision allows asset-rich, income-poor retirees to access the scheme regardless of whether they receive actual pension payments. Additionally, applicants or their partners must own Australian real estate with their name on the property title. Co-owners cannot be bankrupt or subject to personal insolvency agreements.
Private Reverse Mortgage Eligibility: Broader Access
Private reverse mortgages accept applications from Australians aged 60 and over. Some lenders drop the minimum age to 55, though this remains less common across the market. When couples apply jointly, the youngest borrower’s age determines eligibility and borrowing capacity.
Lenders impose minimum property value thresholds that commonly range from AUD 305,798 to AUD 382,248, depending on the institution. Geographic restrictions apply, with certain postcodes excluded from eligibility. Borrowers must own their home outright or carry only a low mortgage balance. In contrast to the home equity access scheme loan requirements, private products impose no pension-related criteria whatsoever.
Property and Insurance Requirements for Both Options
HEAS participants must maintain adequate insurance covering at least 90% of the value of any buildings on the property offered as security. This ensures security remains sufficient throughout the loan term and enables debt recovery.
Private reverse mortgages demand stricter coverage. Loan documents typically require homeowners’ insurance equal to 100% of the property’s replacement cost. Policies must offer replacement cost coverage, which pays for repairing or replacing damaged property with new materials of comparable type and quality, excluding depreciation deductions. Borrowers in certain locations must carry supplemental policies for flood, earthquake or hurricane risks. Property improvements made after loan approval require insurance policy updates reflecting the new replacement value.
Application Process and Approval Timeframes
Private reverse mortgage applications take approximately 4-6 weeks to complete. The process involves meetings with licensed brokers, document gathering, compliance calls to verify loan understanding, property valuations, and solicitor reviews before settlement.
The government home equity access scheme operates through Centrelink online accounts linked to myGov. Applicants must prove their identity and gather supporting documents before submission. Whilst some applications process quickly, many face delays stretching from two months to six months or longer. Unlike private products, hardship circumstances cannot expedite HEAS processing times.
Cost Comparison: Interest Rates and Total Loan Growth
HEAS Interest Rates: The 3.95% Government Advantage
Interest under the home equity access scheme stands at 3.95% per annum. The Minister for Social Services sets this rate, which compounds fortnightly on the outstanding loan balance. This rate has remained unchanged since January 2022, sitting below the Reserve Bank’s official cash rate of 4.1%. For instance, a borrower drawing $805,013 over 15 years accrues $294,041 in compound interest, bringing the total balance to $1,099,055.
Private Reverse Mortgage Interest Rates: 8-10% Market Reality
Private lenders charge substantially higher rates due to extended repayment deferral and market-based pricing. The current product range is 7.79% to 8.91%, with Heartland Bank offering 8.88% on new applications from February 2026. Household Capital’s standard reverse mortgage carries rates between 7.79% and 8.79%, depending on product structure. In contrast to government rates, the typical private market operates within the 8% to 10% band.
15-Year Projection: How $150,000 Compounds Under Each Option
The rate differential creates dramatic long-term cost variations. Starting from a $152,899 loan balance, HEAS debt grows to $273,383 after 15 years at 3.95%. The same principal at 9% private rate balloons to $556,932 over the identical period. That represents $283,548 in additional debt accumulated purely from the interest rate gap. On the other hand, a $76,450 private loan at 8.5% more than doubles to roughly $178,280 after 10 years.
Hidden Fees and Establishment Costs
Government home equity access scheme loans impose no establishment or monthly service fees. Private products require upfront establishment fees of $1,453, though some lenders charge between $1,376 and $2,905. Valuation fees for properties exceeding $3,057,980 are an additional $1,453. Special attendance fees cost $382 per occurrence. Note that discharge fees reach a maximum of $841. Monthly service fees, when charged, typically range from $15 to $23.
Impact on Age Pension Entitlements
HEAS payments remain exempt from pension income tests, preserving existing Age Pension entitlements. The scheme’s fortnightly payments do not affect aged care means testing either. Private reverse mortgage lump sums operate differently, potentially affecting asset test assessments depending on fund usage. Cash held in bank accounts counts as assessable assets, whereas spending on the home itself does not.
Flexibility vs Affordability: Choosing Your Best Option
When HEAS Makes Financial Sense
The government home equity access scheme delivers maximum value for retirees aged 67 or older seeking regular income supplementation rather than large capital drawdowns. The 3.95% rate saves significantly over 15 to 20 years compared to private alternatives. Borrowers content with fortnightly payment structures and willing to work within the 150% pension rate cap find HEAS hard to beat. For that reason, asset-rich retirees wanting to preserve home equity while accessing modest ongoing funds benefit most from this option.
When Private Reverse Mortgages Suit Your Needs
Private products serve borrowers aged 60 to 66 who are entirely locked out of the home equity access scheme. They suit anyone requiring lump sums for Refundable Accommodation Deposits, home renovations, mortgage clearance, or debt consolidation. The flexibility of lines of credit appeals to those wanting control over drawdown timing without fixed payment schedules. In contrast to HEAS restrictions, private reverse mortgages accommodate needs exceeding government maximums.
Lump Sum Access: Private Wins by Default
HEAS participants have access to only restricted lump-sum advances, capped at 50% of the annual Age Pension amount. These advances reduce fortnightly loan payments over the following 26 fortnights. Private lenders, on the other hand, approve substantial lump sums at loan commencement. Essentially, anyone requiring immediate significant capital has no HEAS alternative.
Regular Income Streams: HEAS Structured Approach
The home equity access scheme loan provides fortnightly payments up to 150% of the maximum pension rates. Combined pension and loan payments cannot exceed this threshold. Private products offer regular advances on a monthly, quarterly, or annual schedule for up to ten years, though these compound at higher rates.
Borrowing Limits and Maximum Access Under Each Scheme
HEAS maximum loan amounts depend on property value (rounded down to the nearest $15,289.90) and age component calculations. Private reverse mortgages typically allow 15% to 20% of home value at age 60, increasing by approximately 1% annually. Both products can operate simultaneously on the same property.
Critical Protections and Risk Factors in 2026
The No Negative Equity Guarantee: What It Actually Means
All Australian reverse mortgages include a no-negative-equity guarantee, ensuring borrowers never owe more than the home’s value when it’s sold. Since 18 September 2012, this protection has become mandatory on all new reverse mortgage contracts. When the property is sold, neither the borrower nor their estate owe more than the market value, even if the loan total exceeds that amount. Specifically, this law protects homeowners and families from debt exceeding the home value.
ASIC Regulations for Private Reverse Mortgages
ASIC remade legislative instruments in 2026, modifying required reverse mortgage disclosures by Australian credit licensees. The regulator’s review found that reverse mortgages help older Australians improve their retirement living standards whilst remaining in their homes, though lenders can do more to improve long-term consumer outcomes.
Impact on Estate and Inheritance Planning
A reverse mortgage substantially reduces home equity. When the property sells, either upon aged care entry or after death, the loan balance and accrued interest are paid first. Whatever remains goes to the estate, meaning beneficiaries may inherit less than expected.
Aged Care Fee Implications Down the Track
Depending on fund usage, reverse mortgage proceeds may count towards Centrelink’s assets or income tests, potentially affecting Age Pension payments. Lump sums left in bank accounts typically count towards asset tests, reducing pension entitlements. In contrast, funds used for home improvements, medical bills or aged care often receive different treatment and may not impact pension similarly.
Exit Strategies: Selling, Downsizing, and Loan Portability
Selling the property clears the reverse mortgage balance from proceeds. If sale price exceeds the mortgage, extra funds belong to the owner. Correspondingly, paying off the loan in full allows retention of the home for inheritance or enables a non-borrowing spouse to remain there. Refinancing into a traditional mortgage suits borrowers with good credit and stable income, requiring regular monthly payments over 15 to 30 years.
Conclusion – Home Equity Access Scheme
Neither option wins across every measure, and the right choice depends entirely on individual circumstances. HEAS delivers substantial interest savings for those aged 67 and over who can work within its structured payment limits. Private reverse mortgages cost considerably more but offer immediate access and flexibility that HEAS cannot match.
As a result, retirees should consider their specific situation:
- Age 60-66? Private products remain the only option.
- Need significant lump sums immediately? Private lenders approve larger amounts.
- Want to minimise long-term debt? HEAS saves hundreds of thousands in interest.
- Require flexible drawdown control? Private products deliver better autonomy.
Above all, both schemes allow retirees to access home equity whilst remaining in their property.
Is the Home Equity Access Scheme better than a private reverse mortgage?
It depends on your circumstances. HEAS offers significantly lower interest rates (3.95% versus 8-10%), which can save hundreds of thousands in interest over time. However, it has stricter eligibility requirements, limited loan amounts, and slower processing times. Private reverse mortgages provide greater flexibility, faster approval, and larger lump sum access, but at considerably higher costs.
What is the main disadvantage of taking out a reverse mortgage?
The primary concern is that a reverse mortgage increases your debt whilst reducing your home equity over time. Interest compounds monthly and adds to your loan balance, meaning your debt grows continuously. This can substantially diminish the inheritance you leave to beneficiaries and may affect your financial position if you need to enter aged care later.
Who is eligible to apply for the government Home Equity Access Scheme?
You must be at least Age Pension age (currently 67) or have a partner who has reached that age whilst you receive Carer Payment or Disability Support Pension. You need to own Australian property with your name on the title, and you must either receive or be eligible for a qualifying pension, even if your payment rate is zero due to means testing.
How do reverse mortgage proceeds affect Age Pension entitlements?
HEAS payments don’t affect your Age Pension as they’re exempt from income tests. However, private reverse mortgage lump sums may impact your pension depending on how you use the funds. Money left sitting in bank accounts typically counts towards asset tests, potentially reducing pension payments, whereas funds spent on home improvements or medical expenses often receive different treatment.