Reverse Mortgage vs Government Home Equity Access Scheme (HEAS): Pension & Equity Comparison (2026–2027)
Compare reverse mortgages with Australia's Home Equity Access Scheme (HEAS), including equity release, pension considerations, interest and repayment differences.
- ✓ The Home Equity Access Scheme (HEAS) is a government-backed equity release scheme administered by Services Australia for Age Pension age retirees.
- ✓ HEAS interest rates (typically ~3.95% p.a.) are substantially lower than commercial reverse mortgage rates (~7.50% - 8.50% p.a.).
- ✓ HEAS allows fortnightly income top-ups up to 150% of the maximum Age Pension, while commercial reverse mortgages offer larger lump sum drawdowns.
- ✓ Both commercial reverse mortgages (under the NCCP Act / National Credit Code) and HEAS (under the Social Security Act 1991) feature statutory no-negative-equity guarantees, but operate under separate legal and administrative frameworks.
- ✓ Lump sum drawdowns held in bank accounts can affect Centrelink asset and income tests for the Age Pension.
For Australian retirees seeking to unlock home equity to fund retirement or home improvements, two primary avenues exist: Commercial Reverse Mortgages offered by specialized non-bank credit providers, and the Home Equity Access Scheme (HEAS) administered by the Australian Government through Services Australia (Centrelink) and DVA.
Understanding the structural differences in interest rates, payout methods, Age Pension asset testing, and statutory protections is essential for sound retirement planning.
1. What Is the Home Equity Access Scheme (HEAS)?
The Home Equity Access Scheme (HEAS)—formerly known as the Pension Loans Scheme (PLS)—is a government-backed voluntary loan program. It allows Australian homeowners who have reached Australian Age Pension age (currently 67+) to borrow against the equity in their real estate to boost retirement income.
Key features include:
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Concessional Government Interest Rate: Currently set at 3.95% p.a., which is substantially lower than commercial market rates.
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Regular Income Focus: Designed primarily to deliver regular fortnightly payments (up to 150% of the maximum fortnightly Age Pension rate), with capped lump sums available.
2. Head-to-Head Comparison: Commercial Reverse Mortgage vs Government HEAS
3. Interest Compounding Impact: Why Rate Differences Matter
Because interest is capitalized into the loan balance, the difference between a 3.95% government rate and an 8.00% commercial rate produces a massive divergence in compounding debt accumulation over a 15-year period:
15-Year Scenario on a $150,000 Advance:
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HEAS at 3.95% p.a. (Fortnightly Compounding): Debt balance grows to approximately $271,200 after 15 years under statutory Services Australia rules.
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Commercial at 8.00% p.a. (Monthly Compounding Assumption): Debt balance compounds to approximately $496,000 after 15 years under this illustrative market benchmark.
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Equity Preserved: Under these modeling assumptions, the lower statutory rate preserves over $224,800 in additional net estate equity for the homeowner or their heirs.
4. Centrelink Age Pension Asset & Income Test Impact
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Loan Proceeds Are Debt, Not Income: Monies received from either a commercial reverse mortgage or HEAS are treated as capital borrowings and are not assessable income for the pension income test.
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Bank Account Deeming & Asset Rules: If borrowed funds are deposited into a cash bank account, Centrelink includes those funds in both the Assets Test and Income Deeming Rules, which may reduce your pension payment. Spending the funds directly on home modifications, health expenses, or everyday living avoids asset accumulation.
5. Calculate Your Compounding Loan Balance & Equity
Want to compare how commercial interest rates and property growth affect your home equity over 10 to 30 years?
Use Calcivo's [Reverse Mortgage Calculator](/calculator/reverse-mortgage-calculator) or explore our ASIC Safeguards & No Negative Equity Guarantee Guide.
Frequently Asked Questions
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