Many older Australians value their age pension payments. For the majority of recipients, the use of a reverse mortgage will have no effect on current entitlements.
Each age pension recipient is assessed on both their assets and income to determine their pension payment.
With a Reverse Mortgage, up to $40,000 is exempt from the assets test for up to 90 days, so the money needs to be spent within this time limit to avoid it becoming an assessable asset. If $50,000 is used for home repairs/maintenance on the principle place of residence, (an exempt asset), the monies spent will not be included as an asset. If the $50,000 is to pay for a new car, the value of that car then becomes a non-deemed asset.
If the funds are to purchase an assessable asset or for gifting or lending to someone, then Centrelink will create an asset for the amount and deem an income against it. If the total assessable assets reach the minimum set by Centrelink, then the aged pension may be affected.
So having a reverse mortgage has no effect on your Centrelink entitlements, but what you do with the funds in some cases may affect your pension. We can guide you in this area.
Advisers are required to have a discussion with potential borrowers about future needs and many discussions lead to having a Line of Credit structure into the loan facility to meet any future needs, if and when they may occur. From an age pension perspective, it is important to know that a Line of Credit is not regarded as an asset.
Are you eligible for the full age pension?
From 20th September 2021, the full age pension plus supplements is $967.50 p/f for a single and $729.30 each per couple.
We recommend recipients check their payments to reflect their current asset and income position.
