Last amended: 11 November 2008
How long home equity conversion loan is a disregarded asset?
The first $40,000 of an unspent home equity conversion loan is a disregarded asset for ninety days only. If after ninety days a person has not spent the loan, the amount is an assessable asset.
Example of a loan spent within ninety days
A person gets a home equity conversion loan of $40,000. They spend the loan in forty five days. The loan is disregarded for the full forty five days.
Example of a loan not spent within ninety days
A person gets a home equity conversion loan of $70,000. They do not spend the loan within ninety days. Therefore:
- $40,000 is disregarded for ninety days.
- $30,000 is assessable immediately.
After ninety days the total loan amount is assessable under the assets test.
Lines of credit
Where the lending institution provides home equity conversion loans through a line of credit, the ninety day assets test exemption applies to the first $40,000 only and a subsequent drawing down on the line of credit does not receive a further ninety day exemption.
eg. a home equity loan provides for an initial lump sum amount of $40,000 to be used within ninety days, with further funds then accessible through an approved line of credit. The further funds accessed do not receive a ninety day exemption.