Many Kiwi seniors have rising cost of living pressures and bill stress. One option to help ease the squeeze is releasing home equity with a reverse mortgage.
A reverse mortgage allows people aged 60 and over to release home equity to live a more comfortable retirement. The funds can be used any way they like including debt consolidation, medical and healthcare and even a holiday.
Importantly, you continue to own and live in your home for as long as you wish. Unlike a standard mortgage, you don’t need to make regular repayments. Instead, interest is calculated on the balance outstanding, and added monthly to your loan. Voluntary repayments can be made at any time, which reduces the balance and interest charged.
The total loan amount, including accumulated interest, is repayable when you move permanently from your home; this could occur when you sell your property, move into long-term care or pass away.
A Secondary Property Loan is also available which allows you to take a reverse mortgage against a secondary property, such as an investment property or holiday home. Specific lending criteria apply for a Secondary Property Loan.
But also beware:
- The interest rate is high and compounds monthly, because you don’t make repayments, the balance you owe will climb
- Reverse mortgages by definition are a debt, and the debt has first dibs on your estate
- There ARE alternatives to reverse mortgages like downsizing, selling your house to family, a retirement home, sub-divide spare land, rent out part of your property.
- Check the fees
- A reverse mortgage has a FLOATING (i.e. variable) interest rate, which may increase down the line.
Speak to your Mortgage Link adviser about whether a reverse mortgage is right for your client.
www.mortgagelink.co.nz 0800 466 784
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.