To be eligible to participate in the Home Equity Access Scheme, a person must be:
- a veteran who has reached pension age and is eligible for service pension; or
- the partner of a veteran who is eligible for partner service pension, where the veteran has reached qualifying age; or
- a widow(er) or ex-partner of a veteran who has reached pension age and is eligible for partner service pension; or
- a war widow(er) who has reached qualifying age and is eligible for income support supplement; or
- entitled to receive an age pension from DVA; and
- not be declared bankrupt or subject to a personal insolvency agreement; and
- own property in Australia of sufficient value to secure the payment of any loan that may become payable.
Income Support Supplement (ISS) and the Home Equity Access Scheme
A person who has reached qualifying age and receiving or is eligible to receive income support supplement is eligible to participate in the Home Equity Access Scheme.
War widows or war widowers who are also veterans and the Home Equity Access Scheme
A war widow(er) who is also a veteran is eligible to participate in the Home Equity Access Scheme
Security required for Home Equity Access Scheme
Before payment under the Home Equity Access Scheme may be considered, a pensioner needs to have sufficient real assets less any nominated amount that they are prepared to offer as security against the loan. Only property owned in Australia can be used as security for a loan under the Home Equity Access Scheme. Any property, including the principal home, may be used.
Securing the loan
The loan is secured by a statutory charge over the property that the person has offered as security. In practical terms, the Commonwealth lodges a caveat over the property, which prevents the sale of the property until those identified on the caveat are given a hearing. The caveats are lodged by Legal Services and Audit Branch. In some states a 'notice of charge' may be issued rather than a caveat. A notice of charge has the same effect as a caveat, in protecting the Commonwealth's interest in the property.
The effect of a mortgage on property
A mortgage on a property which is offered as security for a Home Equity Access Scheme loan does not necessarily disqualify a person from participating in the scheme. The mortgage should be taken into account when valuing the person's equity in the real asset, and when calculating the maximum loan available to the person.
Payment for costs involved
The applicant is responsible for the costs to the Commonwealth in placing the charge or caveat on the property. Payment of costs can be made either at the time of registration, or can be added to the loan. The person is also responsible for the subsequent cost of removing the charge or caveat. If this occurs after the person's death, their estate will incur the charge.
Insurance
Before the granting of a loan, proof of adequate and appropriate insurance is required. Participants are required to keep the insurance current and notify DVA of any significant changes.
Adequate insurance means having a building insurance policy that covers the property for standard events including:
- fire,
- escape of liquid;
- flood;
- storm and
- explosion,
for an insured amount that is equivalent of at least 90 per cent of the value of all buildings on the property. HEAS participants are required to advise of any significant changes to the insurance policy covering the property used to secure a HEAS loan.
As vacant land may be used as a securable “real asset/real property” and therefore can be offered as security for a HEAS loan, Third Party Liability Insurance would be required for this type of asset.
Nominated amount
A nominated amount is the agreed amount of equity of a person’s secured asset that they elect not to be included in the determination of their maximum loan amount. This limits the growth of their HEAS loan, but does not prevent the recovery of this amount by the Commonwealth. The recipient may change the nominated amount at any time.
The nominated amount will also be taken into account in determining whether the value of a person’s real assets are sufficient to secure the payment of any loan that may become payable to the Commonwealth under the HEAS.
Example: A person has a property valued at $200,000 that they offer as security for their HEAS loan. They wish to nominate an amount of $85,000. When determining their maximum loan amount under the HEAS, the value of real assets will be $115,000 (i.e. $200,000 minus $85,000). This is the difference between the total value of the property and the amount of equity they have nominated. The participant's HEAS loan reaches $100,000 by the time they cease to participate in the scheme. If the value of the property has fallen to $150,000 at the time it is sold and the debt is to be repaid, the full $100,000 debt must be repaid, even though this would leave the person with less than their nominated amount.