‘Government Reverse Mortgage’ (PLS) vs Home Equity Release Lenders

By Darren Moffatt

February 24, 2020


In the 2018 Federal Budget, the Australian government introduced key changes that allow seniors with full age pension entitlements to access the government-funded Pension Loans Scheme (PLS) (or often dubbed the ‘government reverse mortgage’). 

While the PLS was established in 1985 by the Hawke Government, very few retirees were aware of it and fewer have used it because of certain limitations on eligibility. 

In fact, in 2010, there were only 710 seniors who had outstanding loans under the PLS. But all that changed from 1 July 2019 when new the Turnbull Government broadened eligibility that opened the loan option to more pensioners. 

[ RELATED POST: Pension Loans Scheme: Government Reverse Mortgage to be Expanded

You must meet the following requirements before you can access the PLS: 

  • You or your partner are Age Pension age 
  • You are qualified to receive a qualifying pension
  • You own or your partner owns a real estate in Australia
  • Your real estate property is covered with adequate and appropriate insurance 
  • You are not bankrupt
  • You are not subject to a personal insolvency agreement

How Much Can You Get from the PLS? 

The amount of loan you can get under the PLS will depend on your age and how much equity you own in your real estate property. 

Through Services Australia, you can access a maximum loan amount, which is the total loan that you can receive under the scheme. 

But take note that the loan proceeds is not in a lump sum and instead paid into your account in fortnightly payments. 

The PLS is still a Limited Option for Seniors 

It is true that the expanded PLS will greatly benefit full pensioners with no other alternatives to sustain their income. 

But it is also true that the scope of the PLS can be called limited because you can’t receive the loan amount in lump sum. 

You may only receive the proceeds of the PLS as an income stream that will be bundled in your pension. 

[RELATED POST: Pension Loans Scheme Extension Benefits Age Pensioners But Still Limited

Therefore, PLS is not ideal for seniors who need a sizeable amount needed for important expenses such as Refundable Accommodation Deposit (RAD). 

RAD is an upfront payment to the residential aged care home that ranges between $300,000 and $400,000. 

While the extension of the PLS is commendable, it is not for everyone. 

If you need a lump sum amount to pay for aged care and other needs during retirement, a Seniors First reverse mortgage is a more suitable solution. 

It will allow you to access the wealth of your home without the need to sell it, and you can use the loan proceeds (LUMP SUM) to improve the standard of living when you stop working. 

The table below provides a comparative insight between the PLS and a standard reverse mortgage offered by Seniors First: 

 ‘Government Reverse Mortgage’
(Pension Loans Scheme )
 Standard Reverse Mortgage
Increase monthly cash flow Yes Yes
Real estate needed as security Yes  Yes
Repayable at any time? Yes  Yes
Buy a new car No  Yes
Fund home improvements No  Yes
Fund an overseas holiday No  Yes
Provide a ‘line of credit’ No  Yes
Taxable? No  No

If you want to know more about reverse mortgage, you can call Seniors First on 1300 745 745 or visit www.seniorsfirst.com.au 

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