Can I access the PLS if I've been denied a reverse mortgage from the bank?

Can I access the PLS if I've been denied a reverse mortgage from the bank?

20th July, 2020

Over the past few months we’ve had a number of seniors approach us with the unfortunate news that they’d applied for equity release or reverse mortgages from the banks and other commercial providers, only to be declined. In contrast, the Government accepts any Australian based real estate as security for the Pension Loans Scheme (PLS) where the applicant owns the underlying land (i.e. freehold title).

The reasons for the declines tend to fall into two categories:

  1. Their property was unacceptable or
  2. Their property was acceptable just not in the ‘right location’

It is quite common for equity release providers (including reverse mortgages) to restrict lending to only:

  • Stock standard residential properties (e.g. houses, townhouses, units and apartments); and
  • Major capital cities and urban areas where property demand and growth rates are more stable/predictable

We recently had one case of a single, 78-years-young female pensioner who was knocked back due to her home supposedly standing in an ‘unsuitable location’ (100km east of Perth).

In contrast, the government accepts any Australian based real estate as security for the PLS where the applicant owns the underlying land (i.e. freehold title). As a consequence, the PLS accepts a much broader range of property types including houses, townhouses, units and apartments as well as vacant land, commercial, retail, industrial, business, self contained flats, farms, hobby farms, market gardens and oversize residential blocks (greater than two hectares).

To reinforce the contrast, the Government accepts such property anywhere in Australia which brings in all those seniors who do not live in our capital cities and major urban areas.

By way of example, one of Pension Boost’s most endearing customers is a 92 year old female self funded North Queenslander who, although she lives in a retirement village, has been approved for the PLS by providing her pineapple farm as security. We have also successfully assisted a number of seniors who live in and around rural towns as well.

Consistent with commercial providers, there are pre-requisites the Government requires to approve any PLS applicant. These include:

  • You must meet minimum age and residency requirements
  • You (or directly related parties) must own the underlying land – not lease or rent it (which is how many retirement village and over 50 community living centres are structured)
  • You must have sufficient ‘net equity’ (i.e. the property value less all secured debts) in the property being put up as security

To find out what you’re eligible for under the PLS, try our PLS Calculator.

Try the PLS calculator

 

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