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Reverse mortgages

Reverse mortgages let older Kiwis borrow equity from their homes to spend when they need it.

Name Product Standard Rates From (p.a.) Special Rates From (p.a) Loan Terms Available Application Fee
ANZ Fixed Rate Home Loan
5.15%
4.55%
6 months to 5 years
N/A
ASB Fixed Rate Home Loan
4.49%
N/A
6 months to 5 years
$150 - $400
The Co-operative Bank Fixed Rate Home Loan
4.79%
4.29%
6 months to 5 years
$260
HSBC Fixed Rate Home Loan
4.39%
N/A
6 months to 5 years
$250
Kiwibank Fixed Rate Home Loan
5.55%
4.55%
6 months to 5 years
N/A
Resimac Fixed Rate Home Loan
5.60%
N/A
1 to 5 years
$399
Interest rate depends on available equity, term length and credit status.
SBS Fixed Rate Home Loan
4.69%
4.19%
6 months to 5 years
$250
TSB Fixed Rate Home Loan
5.14%
4.34%
6 months to 5 years
N/A
Westpac Fixed Rate Home Loan
5.09%
4.49%
6 months to 5 years
$140
ANZ Floating Rate Home Loan
5.54%
N/A
N/A
N/A
ASB Floating Rate Home Loan
5.35%
N/A
N/A
$150 - $400
The Co-operative Bank Floating Rate Home Loan
5.45%
5.45%
N/A
$260
HSBC Floating Rate Home Loan
5.49%
N/A
N/A
$250
Kiwibank Floating Rate Home Loan
5.00%
5.00%
N/A
N/A
Resimac Floating Rate Home Loan
4.59%
N/A
N/A
$399
Interest rate depends on available equity.
SBS Floating Rate Home Loan
5.29%
N/A
N/A
$250
TSB Floating Rate Home Loan
5.59%
4.79%
N/A
N/A
Westpac Floating Rate Home Loan
5.54%
N/A
N/A
$140
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Reverse mortgages offer a way for older homeowners to access the wealth they have tied up in their homes. You borrow money and pay back the lender either in instalments or when you sell the property. Before taking out a reverse mortgage, you need to know that these mortgages are not like other mortgages. Reverse mortgages have higher interest rates, and if you borrow too much or if your property loses value, you may find yourself in financial difficulty.

  • Always get professional financial advice before taking out a reverse mortgage.

    How do reverse mortgages work?

    Here are the basic facts on reverse mortgages:

    • You need to be at least 60 years of age to get one.
    • You need to have equity in your property.
    • The bank lends you money based on this equity.
    • You repay what you borrow, plus interest, when you sell the property or pass away.

    A reverse mortgage lets you unlock some of the wealth in your home now so that you can spend it to cover costs and fund part of your retirement. However, you need to understand that you ultimately need to repay the debt by selling your property.

    When this happens, a substantial amount of the property’s value goes to the lender (depending on interest charges and how much you borrow). So if you don’t do the maths correctly, you could find yourself short on cash towards the very end of your life.

    Plus, if you’re planning to leave your property to your children, understand that taking out a reverse mortgage could substantially reduce their inheritance.

    What is equity?

    Equity is the value of a property you own, minus any mortgage debt. A reverse mortgage lets borrowers from the age of 60 convert this equity into cash.

    The lender determines the amount of equity it releases by your age and the property’s value.

    Once you receive loan approval, you can access your money to use however you wish, and the lender charges interest on the amount you owe.

    You don’t have to make ongoing repayments with this type of product. Instead, the interest payments are added to the loan balance each month.

    How do I repay a reverse mortgage debt?

    You repay your reverse mortgage debt when:

    • You decide tosell your home.
    • The last surviving borrower dies (if you take out the mortgage as a couple).
    • You move into an aged care facility.

    How do I access the money?

    You can take the loan amount as one of the following or a combination of the following:

    • A lump sum.
    • A regular monthly payment.
    • A line of credit.

    How do I repay a reverse mortgage debt?

    You repay your reverse mortgage debt when:

    • You decide to sell your home
    • The last surviving borrower dies (if you take out the mortgage as a couple)
    • You move into an aged care facility

      How much of my equity can I borrow?

      Most lenders let you borrow between 15% and 45% of a property’s value, and the older you are, the more you can borrow.

      However, the lender needs to make sure the equity in your property is enough to cover the loan plus the interest. For example, if your home is valued at $500,000, you can only access a maximum of $75,000, which ensures the value of your home is enough to repay your loan in full, plus interest.

      Some lenders have specific borrowing amounts depending on your age. Here’s an example.

      Age of BorrowerPercentage of Property Value Available
      6015%
      6520%
      7025%
      7530%
      8035.5%
      85+45%

      Use our reverse mortgage calculator to estimate how much you can borrow and what it is going to cost you

      To use the calculator, enter the following details:

      • Your age. The older you are, the more equity you can borrow.
      • Your property’s value. You can borrow a percentage of your property’s value. Estimate your home’s current worth if you’re not sure.
      • An estimate of your property’s future value. The lender factors in the future growth of your property’s value. You can choose high, medium, low or insert your own figure. Lenders usually go with 3%.
      • The interest rate. Add the interest for the reverse mortgage product you are interested in.
      • Payment options. You can be paid a lump sum or regular monthly payments.

      Is there anything else I should know about these products?

      Reverse mortgages are aimed at older people and affect the value of most people’s most significant asset: their family home. That’s not to say that reverse mortgages are bad, but borrowers need to research and decide if it is the right choice for them.

      It’s worth bearing the following in mind when considering a reverse mortgage:

      • Higher interest.Interest charges on reverse mortgages are usually higher than typical mortgages. An average floating rate on a reverse mortgage can be between 7% and 8%, but this varies from lender to lender. As the interest compounds, the loan amount can increase rapidly.
      • Fees. Setup costs for a reverse mortgage may vary between lenders, which typically covers the lender application fee, legal charges, and broker fees.
      • Pension eligibility. A reverse mortgage may affect your ability to qualify for the pension. Contact Work and Income New Zealand to find out how it could impact your eligibility and to see if you can structure your reverse mortgage in a way that does not interfere with your pension benefit.
      • Break fees.If you fix the interest rate on your reverse mortgage, the charges to break the agreement can be costly.

      To minimise the risk of paying too much interest, you should only borrow what you need. Carefully consider the current value of your house and the amount of equity you intend to borrow from it. Speak to a mortgage broker or financial planner to determine how much the interest charges are in total.

      What fees can I expect with a reverse mortgage?

      You need to be aware that reverse mortgages can come with many fees. They can include the following:

      • Lender application fee
      • Legal charges
      • Broker fees
      • The initial valuation fee of your house
      • Mortgage discharge fee, which you pay when you fully repay your loan
      • Equity protection fee, taken from your initial loan. Equity protection lets you choose a set amount of equity that the bank can’t access, and you may use as an inheritance for your beneficiaries
      • Loan variation fee, if you change the terms of your loan

      Other fees may apply depending on the lender, so make sure you read the reverse mortgage terms and conditions carefully and ask if anything is unclear.

      Are there any alternatives to reverse mortgages?

      If you want to access the equity in your property, but you don’t want to take out a reverse mortgage, the primary alternative is to sell or downsize your home. However, this incurs substantial costs such as real estate agents and conveyancing fees, so it’s a good idea to weigh the benefits and risks involved.

      Other alternatives include renting out your home (so you can move to a smaller property), taking in a boarder or subdividing your section. You could even sell part of your home to your family. However, if you do, you must ensure you have independent legal advice, as there have been instances where elderly relatives have been left homeless when family relationships sour.

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