Nick Bruining: Delays to Home Equity Access Scheme applications frustrate retirees seeking extra cash
The Federal Government's popular Home Equity Access Scheme — which is similar to a reverse mortgage — has been bogged down, with many applicants reporting delays dating back to last year.
Former Centrelink financial information officer-turned independent financial planner Annette Sinclair said the delays had been significant.
'While some go through reasonably quickly, the majority seem stuck in the system for at least two months — and often longer,' Mrs Sinclair said.
One reader who contacted Your Money lodged a completed application in December last year. The application was cancelled because of some missing information and later resubmitted.
After waiting several weeks for a response, it was discovered the insurance cover for the home came up for renewal during that period. Although renewed, it appears Centrelink had not requested proof of renewal and, therefore, rejected the application.
The HEAS is a low-cost reverse mortgage arrangement which allows senior Australians to tap into their home's equity at a relatively low interest rate of 3.95 per cent. Like other reverse mortgages, only real property can be offered as security. Houseboats, mobile homes and lease-for-life retirement village arrangements are ineligible.
Commercial reverse mortgage rates are typically more than double the scheme's rate, ranging between 8 and 10 per cent a year.
The rate you are charged is important because unlike a conventional mortgage, you are not required to make any repayments. Instead, the interest cost is added to the loan and compounds. When the property is disposed of, the loan plus interest is repaid from the proceeds of the house sale.
The higher the interest rate and the longer the loan is in place, the larger the amount that has to be repaid.
Under the HEAS arrangements, people aged over 67 can access payments of up to 150 per cent of the age pension. That can be in the form of a boosted fortnightly pension payment or two lump sum amounts each year, separated by a six-month interval.
That means a single could currently access up to $44,811 a year. For a couple, it's a combined $67,555. Those amounts are less any age pensions received, so a single on a full fortnightly pension could access an extra $14,937 in a year and a couple $11,259 each, or a combined $22,518.
Those amounts would be greater if the person was only receiving a part-pension because of means testing.
'People accessing the lump sum amounts are often doing it for some urgent reason,' Mrs Sinclair said. 'Travelling to visit a very sick relative, or replacing something like a car. The delays in processing an application just add to the stress.'
Services Australia is the department responsible for administering HEAS applications.
General manager Hank Jongen apologised for the delays and revealed there were about 16,000 applications currently in the system.
'Processing times for the scheme vary because they are complex assessments,' Mr Jongen said.
'They also often require information from third parties, such as a valuation request, which can add time to claim finalisation.
'We invest significant time training staff and right now, we're training more staff on these claims to help people faster.'
Mr Jongen said that anyone experiencing hardship should contact Centrelink and explain their circumstances.
That can be done in person or by booking a phone appointment with a Centrelink officer. Bookings can be made via the website or the dedicated older Australians phone line on 13 23 00.
Nick Bruining is an independent financial adviser and a member of the
Certified Independent Financial Advisers Association
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