There is a generation of New Zealanders who did not have the benefit of saving into a Kiwi Saver fund for their whole working life. For this generation, their equity is tied up in their home, and when times are tough, it can be useful to tap into the equity you have in your property.
Reverse Equity Mortgages are when you borrow an amount of money against the value of your property. They have had a bad reputation in the past, but is there a place for them and they do serve a purpose?
Borrowing money against the equity held in your property is an option that helps many people stay in their own homes. Lenders encourage family discussion and independent legal advice before you apply for a reverse mortgage. To protect you and your family there is a maximum percentage of the value of the house you can borrow.
You are limited to borrowing 20 – 50% of the value of the property (depending on your age), so there is always remaining equity for the kids to inherit. Lenders take their duty of care very seriously and offer lifetime occupancy, a no negative equity guarantee, and no loan repayments.
Reverse Mortgages can be used for debt consolidation, to supplement regular income, home improvements or repairs, medical costs, travel, visiting family and friends, buying a car, buying appliances or helping family members.
Interest is calculated monthly and is added to the loan balance. This means interest is charged on interest (compounded). The loan balance will increase over time. You are not required to make regular repayments on the loan although you can do so at any time.
- You can have up to two nominated residents and the loan is only required to be repaid when you sell or the last resident moves out or passes away.
- You can borrow up to 50% of the property value.
- There are two main players in New Zealand SBS Bank and Heartland Bank.
- The property needs to be within certain main city centre boundaries.
If you are over 60 and own your own home and would like to know more contact Marie Donovan from Loan Market for a confidential chat to see if you qualify.