Centrelink Home Equity Access Scheme (HEAS) vs Reverse Mortgage Loans: Which Equity Release Option Is Right for You?

As more Australian retirees seek financial flexibility in later life, two solutions continue to gain popularity: the Centrelink Home Equity Access Scheme (HEAS) and Reverse Mortgage loans in the private sector. While both allow seniors to tap into the equity of their home without needing to sell, these options differ in structure, speed, cost, and regulations.

So, how do you decide which one fits your retirement goals better? In this blog, we unpack the essentials of HEAS vs Reverse Mortgage loans, exploring their advantages, downsides, application processes, and key factors to consider before choosing.

Understanding the Basics

What Is the Home Equity Access Scheme (HEAS)?

Formerly known as the Pension Loan Scheme, the Home Equity Access Scheme (HEAS) is a government-run program that allows eligible Australians of Age Pension age to receive additional income by borrowing against the equity in their home. These payments are delivered either fortnightly or in lump sums and are not taxed, which makes them a popular option among retirees seeking supplemental income. However, the amount is capped at up to 150% of the aged pension. If you are already receiving a full-aged pension you will only be able to get 50% of that amount per annum.

Interest is compounded against the balance and the loan is repaid only when the home is sold, the title is transferred, or the borrower passes away. Importantly, this is not a credit product and is not governed under typical lending regulations, although it does include a “No Negative Equity Guarantee” to protect borrowers.

What Are Reverse Mortgage Loans?

In contrast, Reverse Mortgages are credit-based financial products offered by private sector lenders, typically banks or specialist finance companies. Much like the HEAS, these loans let seniors access their home equity to fund their retirement needs without regular repayments. Instead, interest is compounded against the outstanding balance and the full amount is repaid when the home is sold, or when the borrower permanently leaves the residence. Unlike the HEAS a reverse mortgage loan allows for much larger limits and more freedom with what you can use funds for.

Reverse Mortgages are regulated under the National Consumer Credit Protection (NCCP) Act, and offer more loan features, customisation, and faster access to funds than the HEAS.

Comparing HEAS vs Reverse Mortgages: Key Differences

Pros and Cons of HEAS

✅ Benefits

• Security: Backed by the federal government.
• No tax: Payments are not taxed as income.
• Home ownership: You continue to live in and own your home.
• No negative equity: Borrowers will never owe more than their home’s sale price.
• Cheaper Interest rate: Interest rate is significantly cheaper than commercial products.

❌ Drawbacks

• Long waiting time: Approval may take 4–6 months.
• Limited lump sum access: Strict caps on how much you can borrow at once.
• No credit facility: No access to flexible drawdowns or cash reserves.
• Slow exit process: Closing a HEAS loan to switch to a Reverse Mortgage may take additional months.

The HEAS Application Journey

1. Eligibility Check: You must meet Centrelink’s criteria – including Age Pension age, property ownership, and residency requirements.
2. Submit Application: Lodge your application via Services Australia, which will include a home valuation.
3. Agreement Review: Legal or financial advice is recommended to understand the terms.
4. Wait Period: Approval typically takes 4-6 months.
5. Receive Payments: Once approved, funds are disbursed as scheduled payments or capped lump sums.

Reverse Mortgages: What You Should Know

Reverse Mortgages offer speed and flexibility. You can receive:

• A lump sum 
• A regular income stream 
• A cash reserve/line of credit, where interest only accrues when you draw funds.

They suit retirees who need flexible and quick access to funds for healthcare, home modifications, recreation, gifting, or debt repayment.

Reverse Mortgages are regulated, meaning:

• There are strict responsible lending laws.
• Independent legal advice is mandatory.
• Borrowers receive compliance checks for protection.

However, interest rates are generally higher, and fees may apply depending on the lender. A specialist reverse mortgage broker can assist with the application process making it a much simpler, faster, and smoother process.

Speed vs Security: Which Should You Choose?

When deciding between HEAS and Reverse Mortgages, the trade-off is often between price VS speed and flexibility.

Choose HEAS If:

• You are not in urgent need of funds.
• You prefer dealing with a government agency.
• You want a lower interest rate.
• You are happy with a fixed, capped payment structure.

Choose a Reverse Mortgage If:

• You need faster access to cash.
• You want more loan flexibility and higher borrowing limits.
• You are comfortable with slightly higher interest rates.
• You require custom options like cash reserves or staggered payments.

Real-World Tip: Switching Takes Time

Many seniors begin with the HEAS due to its lower interest rate but later move to a Reverse Mortgage when funds run out or additional lump sums are needed.

However, switching takes time — the government may take up to three months to close a HEAS facility, delaying access to new funds from private lenders. If you anticipate needing higher amounts in future, it may be smarter to consider Reverse Mortgages from the start.

The vast majority find that the HEAS is not suitable and end up with a commercial reverse mortgage.

Final Thoughts: Take a Long-Term View

Your decision to release equity from your home is significant. Whether you choose the HEAS or a Reverse Mortgage, weigh the pros and cons in light of:

• Your retirement goals 
• Life expectancy 
• How long you plan to stay in your home 
• The urgency of your financial need 

Always consult a licensed specialist reverse mortgage credit adviser and consider speaking to a Centrelink Financial Information Services (FIS) officer to ensure you understand all implications, especially concerning your pension.

Need Guidance?

If you’re considering a Reverse Mortgage and want expert support, we can help you assess your eligibility, compare loan features, and guide you through the application process from start to finish.

📞 Call us on 0438 184 784 or CLICK HERE to get started.

FAQs: HEAS vs Reverse Mortgage Loans

1. Is HEAS better than a Reverse Mortgage?
   It depends. HEAS offers lower interest rates but has limited loan amounts and slower processing. Reverse Mortgages offer flexibility and speed, but at higher costs.
2. Can I get both HEAS and a Reverse Mortgage?
   Usually you cannot hold both at the same time. Normally a reverse mortgage must be the only thing on title, but for certain properties of high value lenders may be willing to make exceptions and allow the HEAS on title behind a reverse mortgage.
3. Will a Reverse Mortgage affect my Age Pension?
   It might. If a reverse mortgage is used to create an assessable asset it could impact your pension. Always check with Centrelink or a certified specialist reverse mortgage credit advisor first.
4. How much can I borrow with HEAS?
   Up to 150% of the aged pension. So if you are receiving a full pension, the lump sum cap is $13,350 for singles and $20,850 for couples, with additional limits for frequency and amounts.
5. Are Reverse Mortgages safe?
   Yes, if you work with a specialist broker and receive legal advice. They include consumer protections such as the “No Negative Equity Guarantee” and the “Lifetime occupancy guarantee”.