Home Equity Access Scheme for Aged Care: Is It Worth It?

If you own your home but don't have much liquid cash, the Home Equity Access Scheme (HEAS) can let you access your home equity to fund aged care without selling. It's the government's reverse mortgage, and it's usually a better deal than private alternatives. Here's what you need to know.

What is the HEAS?

The Home Equity Access Scheme (formerly called the Pension Loans Scheme) is a government program that lets eligible Australians borrow against their home equity in exchange for regular income or a lump sum.

It's essentially a reverse mortgage, but offered by the government at below-market interest rates. Unlike private reverse mortgages, there's no risk of the provider going under, and the terms are transparent.

Who can use it?

You must:

• Be of Age Pension qualifying age (67 or over)
• Own Australian real estate with sufficient equity
• Not be bankrupt or have ongoing unsolved disputes about the property
• Have adequate insurance on the property

You don't need to be receiving the Age Pension to use HEAS. Self-funded retirees can apply too.

How much can you borrow?

The amount depends on:

• The value of your home
• Your age (older = borrow more)
• Whether you're single or partnered
• The maximum loan value ratio (typically ≈50% of home equity)

HEAS lets you draw:

• Fortnightly payments: up to 150% of the maximum Age Pension rate (if already on full pension) or 100% (if on part/self-funded)
• Lump sums: up to 50% of the annual Age Pension amount twice per year
• Both: combine fortnightly payments with occasional lump sums

Example: A 78-year-old single homeowner with a $700,000 house could potentially borrow up to $350,000 over time (50% of equity), drawing ≈$1,000 per fortnight plus occasional lump sums.

The interest rate

HEAS currently charges 3.95% per annum (compounding). This is significantly lower than private reverse mortgages (typically 7-10% p.a.) and below most mortgage rates.

The interest compounds on the outstanding balance. This is the critical thing to understand: the debt grows over time. A $100,000 debt at 3.95% becomes about $122,000 after 5 years.

How does it work for aged care?

HEAS is particularly useful in aged care because it lets you:

1. Keep the home (no sale, no CGT, no disruption)
2. Access cash flow via fortnightly payments that help cover daily fees, DAP, or living costs
3. Avoid depleting other assets by keeping super intact and preserving pension

Scenario: Using HEAS to cover DAP

Margaret is 78, single, lives in her $700,000 home which is fully paid off. She needs residential care. She doesn't want to sell the home (it has sentimental value and she hopes to leave it to her children).

Her options:

Option A: Sell the home

• Get $680,000 after costs
• Pay $500,000 RAD
• Remaining $180,000 for ongoing costs
• Home gone from estate

Option B: Keep home + HEAS

• Leave home exempt up to $210,555 (home is empty, so partial exemption)
• Draw ≈$1,000/fortnight from HEAS (≈$26,000/year) to cover DAP and daily fees
• Home stays in estate, debt accrues

After 5 years of HEAS drawdowns, the debt is ≈$140,000. The home (assuming 3% appreciation) is worth ≈$810,000. Net estate: $670,000.

Compared to Option A where the RAD of $500,000 would be refunded plus any remaining cash, the estate value is similar but Option B preserves the home itself.

HEAS income and the means test

This is where it gets tricky. HEAS payments count differently depending on the rules:

• For the Age Pension means test: HEAS income is NOT counted as income (it's a loan, not income)
• For aged care fees: HEAS income IS counted as assessable income

So drawing HEAS won't reduce your Age Pension, but it might increase your aged care fees. The effect depends on how much you draw and your other income.

This is often manageable because:

• Drawing smaller amounts (say $500/fortnight) has minimal impact
• The alternative (drawing on super or investments) also counts as income
• You're using HEAS to pay fees that would otherwise drain other assets

The downside: compound interest

The big thing to understand is that your debt grows exponentially. At 3.95% p.a.:

• $100k debt after 5 years: $121,000
• $100k debt after 10 years: $147,000
• $100k debt after 15 years: $179,000
• $100k debt after 20 years: $217,000

The longer you live and the more you draw, the more of your home equity gets consumed by the debt. If you enter care at 78 and live to 95, the compounding can be substantial.

What happens when you pass away?

The debt is repaid from the sale of the home. Your estate keeps whatever's left after the debt is paid off.

Example: Home worth $900,000 at time of death, HEAS debt $180,000. Estate receives $720,000.

If the debt somehow exceeds the home value (rare but possible with long lifespans), the government doesn't pursue the estate for the difference. It's a "no negative equity" guarantee.

HEAS vs selling vs renting

HEAS is usually best when:

• You want to keep the home
• You don't have a tenant lined up
• You need income more than a large lump sum
• You're comfortable with debt accruing

HEAS is NOT right when:

• You have plenty of liquid assets to draw on first
• You want to maximise estate value for family
• You plan to sell the home anyway

Practical details

• Apply through Services Australia, online via myGov or by phone
• Assessment takes 4-8 weeks, so don't leave it until you're in a cash crisis
• No brokers, apply directly
• Free to apply, no fees for setting up
• Property valuation is done at setup (you may need to pay for this)

Common misconceptions

"The government will take my house." No. They just have a charge on the title. You still own it.

"My family will lose the home." The home goes to your estate per your will. They just have to repay the HEAS debt from the proceeds (or refinance and keep it).

"HEAS payments affect my pension." HEAS drawdowns don't count as income for Age Pension purposes.

"It's only for pensioners." Self-funded retirees can use HEAS too.

The bottom line

HEAS is a useful tool for people who want to keep their home but need cash flow to cover aged care costs. It's cheaper than private reverse mortgages and protected by a no-negative-equity guarantee. But compound interest means the debt grows over time, eating into your estate.

The best way to decide if HEAS is right for you is to model it against the alternatives (selling, renting, drawing down other assets). Our calculator does exactly that, so you can see the 5-10 year impact of each strategy on your fees, pension, and estate.