The Pension Loan Scheme lets people who are at a pension age to apply for a loan from the government to supplement their retirement, which effectively acts as a reverse mortgage. Previously, this loan was only available to part pensioners and self-funded retirees, but now all the pensioners at all age can apply for it. The loan is paid out in every 14 days and can be up to 150 percent of the maximum 14-day pension amount. The property can be the home you live in or an investment property.
This loan is temporary in nature or as an ongoing form of finance. Repayments can be made anytime, which includes the accrued interest. Compounding interest is also charged on the loan balance and calculated in every 14 days. Also, the 14-day payments are taken from the equity kept in your home and will be deducted to the amount of money you receive from your home when you sell it.
Read on for some of the answers to the Frequently Asked Questions (FAQ) related to the Pension Loan Scheme.
- Can the owner of the property be a private company or a trust?
Yes, if you control the entity, the property can be secured against the property owned by a private company or a trust.
- What happens if I own more than one property?
If you own more than one property, you have full rights to nominate which property you’d like to deem as the security.
- What fees are involved in this?
There is a series of fees included in setting up the Pension Loan Scheme which is to be paid by the person taking out the loan. For instance, your property should be registered with the Boards of the country where you reside, which further comes with a cost.
- Are the loan payments free of tax?
Yes, the loan payments are totally tax free.
- Can I repay the loan instead of refunding the money when I sell away my house?
Yes, the pension loan scheme you purchased can be repaid any time. Also, you can partially repay your pension loan and then pay off the remainder when you sell away your home.
- What is the interest rate?
By default, the authorities involved currently charges 5.25 percent on the loan balance, compounding in every 14 days.
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