Reverse Mortgages and the Home Equity Access Scheme in Australia: A Comparison

Key Takeaway

Both reverse mortgages and the Home Equity Access Scheme (HEAS) let older Australians access home equity without selling, but they differ in cost, eligibility, and structure. Reverse mortgages are private loans with higher interest rates (typically 5 to 7 per cent as of August 2026) and flexible amounts, while the HEAS is a government loan with lower rates (currently around 4.5 per cent) but stricter payment caps tied to the Age Pension. Choose based on how much you need, whether you receive the Age Pension, and how long you plan to stay in the home.

Introduction

For Australian retirees with substantial equity in their home but limited income, accessing that wealth can fund living expenses, healthcare, or renovations without downsizing. Two main options exist: a reverse mortgage from a private lender, and the Home Equity Access Scheme (HEAS, formerly the Pension Loans Scheme), a government-backed loan administered by Services Australia. Both let you borrow against your home and defer repayment until you sell, move into aged care, or pass away, but the costs, eligibility rules, and amounts available differ. This comparison explains how each works and which suits different retirement scenarios.

Comparison Summary

Feature	Reverse Mortgage	Home Equity Access Scheme (HEAS)
Provider	Private lender (bank, non-bank)	Australian Government (Services Australia)
Interest rate	5 to 7 per cent (variable or fixed)	Approx. 4.5 per cent (as of August 2026)
Eligibility	Age 60+, own home outright or low existing mortgage	Age Pension age, own Australian property
Maximum loan	Typically 15 to 50 per cent of home value (depends on age)	Fortnightly payments capped at 150 per cent of Age Pension rate
Payment structure	Lump sum, line of credit, or regular payments	Fortnightly payments (like a pension top-up)
Pension impact	May reduce Age Pension (means test applies)	No Age Pension reduction (loan not counted as income)
Costs	Application fee, valuation, legal, establishment (A$1,000 to A$3,000)	Minimal fees (no application or ongoing fees)
Regulation	ASIC, credit code, mandatory reverse-mortgage code	Government scheme, no private lender regulation

Reverse Mortgages

A reverse mortgage is a private loan secured against your home. You receive the funds as a lump sum, a line of credit you draw down over time, or regular payments. Interest compounds on the outstanding balance, and you repay the total when you sell, move, or your estate settles after death. According to ASIC MoneySmart, reverse mortgages are designed for homeowners aged 60 and over who want to access equity without monthly repayments (MoneySmart, 2026).

How It Works

The lender values your home and offers a percentage of that value, typically 15 to 50 per cent depending on your age (older borrowers can access more because the loan has less time to compound). You can choose how to receive the money. Interest accrues daily and compounds, so the debt grows over time. Most reverse mortgages now include a no-negative-equity guarantee: you (or your estate) will never owe more than the home’s sale price, even if the debt exceeds the value.

Pros

• Flexible amounts: borrow a lump sum for renovations, a line of credit for ongoing expenses, or regular payments to supplement income.
• No Age Pension requirement: available to anyone aged 60 or over who owns a home, regardless of pension eligibility.
• No monthly repayments: the debt is repaid when you leave the home.

Cons

• Higher interest rates: private lenders charge 5 to 7 per cent, compounding over years can reduce the equity left for your estate or for future aged-care costs.
• Upfront costs: application, valuation, legal, and establishment fees often total A$1,000 to A$3,000.
• Age Pension impact: the lump sum or drawdowns count in the assets and income tests, potentially reducing your Age Pension.
• Compound growth: if you live in the home for 15 or 20 years, the debt can grow to consume much of the equity.

Home Equity Access Scheme (HEAS)

The HEAS is a government loan that provides fortnightly payments secured against your home. It is administered by Services Australia and is designed to supplement retirement income for Age Pension recipients or self-funded retirees who meet the Age Pension age. Payments are capped at 150 per cent of the maximum Age Pension rate (for a couple combined, or a single person), and interest accrues at a lower rate than private reverse mortgages. The loan is repaid when you sell, move into aged care, or your estate settles.

How It Works

You apply through Services Australia and nominate the fortnightly payment amount you want (up to the cap). The government pays you that amount, secured by a charge over your property. Interest accrues at the rate set by government (approximately 4.5 per cent as of August 2026, reviewed periodically). The loan balance grows over time, but the HEAS does not count as income for Age Pension means testing, so your pension is not reduced. Eligibility extends to Age Pension recipients, self-funded retirees at Age Pension age, and some other payments such as the Disability Support Pension or Carer Payment.

Read also: Offset Account vs Redraw in Australia: Which Actually Saves More

Pros

• Lower interest rate: government rate (around 4.5 per cent) is typically 1 to 2.5 percentage points below private reverse mortgages, reducing the long-term cost.
• No upfront fees: no application, establishment, or ongoing fees.
• No Age Pension reduction: the HEAS loan is not counted as income or an asset, so you keep your full Age Pension entitlement (if eligible).
• Predictable payments: fortnightly structure mirrors pension income, making budgeting easier.

Cons

• Payment cap: you cannot access a large lump sum; the maximum fortnightly payment is capped, limiting how much you can borrow over time.
• Age Pension age requirement: you must be at least Age Pension age (currently 67, as of August 2026), so it is unavailable to those in their early 60s.
• Property must be in Australia: the home must be an Australian property, and the scheme does not extend to overseas properties.
• Slower access: fortnightly payments mean it takes longer to accumulate a large amount compared to a reverse-mortgage lump sum.

Which Option Suits Your Needs?

Choose a Reverse Mortgage If

• You need a large lump sum (for example, A$50,000 to A$100,000 for renovations, debt consolidation, or a caravan).
• You are aged 60 to 66 and do not yet qualify for the HEAS.
• You want flexibility in how you draw funds (lump sum, line of credit, or payments).
• You are not receiving the Age Pension and do not plan to apply, so the Age Pension impact does not matter.

Choose the HEAS If

• You are at Age Pension age and want to supplement your pension or self-funded retirement income with regular, modest payments.
• You want the lowest cost option (lower interest rate, no fees).
• You prefer not to reduce your Age Pension entitlement (if you receive it).
• You can manage within the fortnightly payment cap and do not need a large lump sum immediately.

Consider Your Time Horizon

Both options compound interest over time. If you plan to stay in your home for 20 or more years, the HEAS lower rate can save tens of thousands of dollars compared to a private reverse mortgage. If you expect to downsize within 5 to 10 years, the cost difference is smaller, and a reverse mortgage’s flexibility may outweigh the rate gap.

Conclusion

Reverse mortgages and the Home Equity Access Scheme both unlock home equity for retirees, but they serve different needs. The HEAS offers lower-cost, predictable fortnightly payments for those at Age Pension age who want to preserve their pension entitlement and avoid fees. A reverse mortgage provides larger, more flexible access for those who need a lump sum or are under Age Pension age, but at a higher interest rate and with upfront costs. As covered in foundational texts such as Principles of Finance, equity-release products trade future home value for current liquidity, making the choice highly personal. Assess how much you need, how long you plan to stay in the home, and whether you receive the Age Pension, and confirm eligibility and current rates with Services Australia (for the HEAS) or a licensed mortgage broker (for reverse mortgages) before deciding.

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General Advice Warning: This article provides general information only and does not consider your personal objectives, financial situation, or needs. It is not financial, legal, or lending advice. Reverse-mortgage rates, HEAS rates, and Age Pension eligibility vary and change over time. Consult a licensed financial adviser, mortgage broker, or Services Australia for advice tailored to your circumstances before committing to any equity-release product. Borrowing against your home reduces the equity available to you and your estate, and may affect your Age Pension entitlement (reverse mortgages) or your ability to fund future aged care. Verify all terms, rates, and eligibility criteria with the relevant provider.