If you are over sixty and own your own home, then you may want to consider a reverse equity mortgage. Unlike a traditional mortgage, you are given money, which can be put towards your wellbeing or to remove financial stress.
Our friendly mortgage advisers are here to help you make the right choice for your retirement. Better yet, our services are usually free.
A reverse mortgage is a loan that allows the borrower to convert their home equity into cash. You can borrow an amount against the value of your property; however, it cannot surpass the total value of the property. In New Zealand, reverse mortgages are only available for seniors aged sixty or above. The appeal of a reverse mortgage is that it does not have to be paid back until the house is sold, which is usually when the owner goes into full-time care or passes away. A reverse mortgage typically comes with a lifetime occupancy guarantee, ensuring you have the right to live in your home for as long as you choose. Additionally, equity protection ensures that some equity will be left for you or your estate after the sale, so that no debt is passed along.
A reverse mortgage allows you to take out a loan against your home, providing it is mortgage-free, or nearly mortgage-free. The money from a reverse mortgage can be spent on anything, typically it is used to top up superannuation income, but can also be spent on health care or even holidays. It can be paid in a lump sum of cash, or in regular instalments depending on your needs. You do not need to make any monthly repayments with a reverse mortgage, as the full loan amount (including interest) is repaid when the home is sold. However, you are free to make voluntary repayments at any time, which reduce the balance and the interest charged. It is important to note that providers may be unwilling to offer a reverse mortgage for some properties such as retirement villages, farms and lifestyle blocks.
Pros:
You can spend it on whatever you like
Once a reverse mortgage has been approved, you are free to spend the money however you choose. Whether that means covering medical bills, maintaining your home or travelling.
No monthly repayments
You do not have to make any repayments on the loan until the house is sold, ensuring you can enjoy both financial freedom and retirement.
You can live in your home
While the loan is due for repayment when the house is eventually sold, you will never be forced to move.
Cons
You must stay or sell
While a reverse mortgage allows you to stay in your home, it also means you are not able to rent it out or move without selling. This can be a problem if you want to keep your options open in the future.
Compounding interest
Not having to make monthly repayments on a reverse mortgage is a huge incentive, but it does mean that interest piles on. Repaying a reverse mortgage after twenty years could mean the interest rates on the loan cost more than the loan itself.
How much you can borrow on a reverse mortgage can depend on factors such as your age and the value of your property. Our friendly mortgage advisers can help you figure out what amount is right for you.
Reverse mortgages can be beneficial for some retirees; however, they are not suitable for everyone. Our friendly mortgage advisers can help decide whether a reverse mortgage is the right choice for you.
There are many reasons why someone might take out a reverse equity mortgage, as money from the loan can be spent on almost anything. Reverse mortgages can be used to supplement superannuation income, pay medical bills, buy a car or travel.
How much money you can borrow from a reverse equity mortgage is dependant on factors including your age and the value of your property. Our friendly mortgage advisers can help you figure out what amount is right for you.
The disadvantages of a reverse mortgage are limited living options and compounding interest. To receive the cash pay-outs, you must live within the property and cannot rent it out. Additionally, interest on reverse mortgage is higher than normal mortgages and rapidly compounds without monthly payments.
A reverse mortgage allows you to borrow money against the value of your property, while still living in your home. The money can be spent on almost anything and there are no required monthly repayments.