How retirees are using home equity to boost income

It’s a truth universally acknowledged that a retiree with a home but little in the way of super or other assets could do with some extra income.

Around 66% of Australian retirees owned their home outright in 2023, with an average value of about $1.14 million. A further 13% or so still had a mortgage on their home, with an average value of around $873,000.

While super balances are increasing, they are still far less than the amount of wealth tied up in the family home. Average balances were $510,000 for retirees who owned their home outright and $409,600 for those with a mortgage. A tidy sum, but it may not fund the lifestyle you hoped for over 25-plus years many of today’s retirees can expect to live.

The Age Pension is a safety net, but it doesn’t stretch far. Finding extra cash for unexpected medical costs, aged care, mortgage debt or a desire to help the kids may be out of reach for many.

So it’s not surprising that there’s growing interest from the government and the private sector in finding ways to help retirees unlock the wealth in their home.

The Home Equity Access Scheme (HEAS)

To encourage participation, the government enhanced its Home Equity Access Scheme (HEAS) in July 2022 to allow lump sum payments as well as regular fortnightly income. It also added a no negative equity guarantee (NNEG) to ensure the borrower, or their family, can never owe more than the market value of their property when it’s sold.

The private reverse mortgage sector is also expanding, with new products and new entrants into the market tapping into different areas of need.

So how are retirees using HEAS and reverse mortgages more generally, and what are the trends?