Assessment of income from Home Equity 108-04100010

This document outlines the details of a home equity conversion (HEC) loan agreement.

HEC loan agreement

A home equity conversion (HEC) loan agreement is a mechanism which allows a homeowner to convert all or part of the equity locked up in their home into cash or a stream of income. A key feature of a home equity conversion agreement is that the loan (including interest) is generally not repayable until the homeowner moves out of their home or dies.

HEC loans assessment changes from 23 September 1999

From 23 September 1999 HEC loans are no longer assessed under the income test.

Under section 8(4) and 8(5) of the Social Security Act 1991 the first $40,000 of a HEC loan is exempt from the income test, and under section 8(11) of the Social Security Act 1991 any amount in excess of $40,000 is now exempt from the income test, however, if any of the HEC funds are kept as financial assets, they will be subject to deeming under section 9 (1) of the Social Security Act 1991.

For assessment of Home Equity Conversion loans under the asset test, see Assessment of asset value of Home Equity conversion loans and Reverse Mortgages.