What real estate can and can't be used as security for the PLS?

Marguerite wants to know if her property in a lifestyle village can be used as security for the Pension Loans Scheme (PLS).

Q. Marguerite
I have been reading with interest recent articles on YourLifeChoices about the Pension Loans Scheme. My husband and I live in an over-50s lifestyle village. We own our house (no mortgage). Can this property be used as collateral for the PLS?

A. There are some extra qualifications for using the property in a lifestyle village as security for the Pensions Loans Scheme.

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Firstly, for Centrelink to consider your property as adequate security for the PLS you or your husband’s name must be on the freehold title for the property.

Also, there cannot be a contract term that prevents or limits your ability to sell the property.

Finally, for the property to be considered, you or your husband’s estate must control the distribution of the asset.

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While you have said that you have no mortgage on the property, you must also inform Centrelink if you have any other reverse mortgages in play on the property or if you have used the property as security for any other liabilities, which may then affect your ability to use the property as collateral for the Pension Loans Scheme.

If your lifestyle village is operated under the Manufactured Homes Act rather than the Retirement Villages Act, it means that you will never own the land but only own the dwelling on that land and your name will not be on the title. If that is the case, you will not be able to sue that property as security for the Pension Loans Scheme.

Other things that are important to note when applying for the PLS are that Centrelink will register a charge or caveat with the Land Title Office on the title deed of the property that you are using as security.

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You will have to pay any costs associated with registering and removing the charge or caveat. Centrelink adds these costs to your loan balance and they will accrue interest. You can repay the costs at any time.

You must tell Centrelink if you decide to change the real estate you offered as security for the loan and you need to provide them with a written and signed declaration. The declaration can be from you or a person who has been legally appointed to manage your real estate affairs.

Do you live in a lifestyle village? Have you applied for the PLS? Was it an easy process? What hurdles did you have to overcome before you were given the loan amount you were seeking?

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Written by Ben