Retirement should be a time to relax – whether this means finally getting around to that passion project, heading off on a Fiordland trip, or just spending time with the grandkids. The reality is, however, that many Kiwis over 60 aren’t able to fund the retirement lifestyle they’ve always desired with their savings and NZ Super payments alone.
There are a number of options people can turn to in this situation, whether it’s tightening the belt a bit, taking out a personal loan, using a credit card or downsizing to a smaller home. Another option to consider is releasing equity held in their home with a reverse mortgage.
What is a reverse mortgage and how does it work?
A reverse mortgage is a type of loan that allows people aged 60 and over to access some of the equity in their property without needing to leave home. It can be a great option for people who have the majority of their wealth tied up in their property, but don’t want to sell it in order to free up funds for retirement.
Importantly, with a reverse mortgage you continue to own your home and can live in it as long as you choose, which means you could benefit from any potential increase in property values. Interest is added to the loan each month until you move permanently from the property, at which point the whole loan is repayable – regular repayments aren’t required unless you choose to do so.
It’s also important to note the amount required to repay the loan will never be more than the net sale proceeds of the property, meaning debt won’t ever be passed on to your family. There are also options available to protect a certain percentage of the value of the home, so you can be certain of the minimum portion of equity that will remain.
Reverse mortgages can be used for many purposes, such as home improvements, debt consolidation, covering day-to-day expenses, helping family, paying for medical costs, aged care or purchasing a new car. In many cases, you can also tailor the loan to suit your needs – for example, some lenders allow you to receive funds from your reverse mortgage as a lump sum, as regular advances for up to 10 years, as a cash reserve facility (like a ‘line of credit’), or a combination of all three.
Who provides reverse mortgages in New Zealand?
Heartland is the leading provider of reverse mortgages in New Zealand and Australia. They have helped more than 19,000 Kiwis release equity from their homes to live a more comfortable retirement. Click here to download their free Insights guide or call 0800 488 740 to learn more.
Heartland Bank Limited’s responsible lending criteria, fees, terms and conditions apply.