Reverse Equity Loans in New Zealand: Unlocking the Value of Your Home

What is a Reverse Equity Loan?

A Reverse Equity Loan (also known as a Reverse Mortgage or Equity Release Loan) allows homeowners over 60 to borrow money using their property as security – without the need for regular repayments. This financial product is designed to help senior citizens access the equity tied up in their homes to fund everyday expenses, healthcare, travel, or home improvements.

Unlike traditional loans, the borrowed amount plus interest is repaid when the borrower sells the home, moves into long-term care, or passes away.

Key Benefits of Reverse Equity Loans

1. Access Cash
   Use your home’s equity to fund medical costs, renovations, travel, or supplement your retirement income – without selling your property.

2. No Regular Repayments Required
   You can choose to make no repayments. The loan is typically repaid from the sale of your home when you move out or pass away.

3. Continue Living in Your Home
   Maintain ownership and residency in your home while enjoying financial flexibility.

4. Flexible Loan Options
   Borrow as a lump sum, regular income, or a combination, depending on your needs.

5. Potential to Borrow More Over Time
   If your property’s value increases, you may be eligible to borrow more in the future.

Considerations Before Applying for a Reverse Equity Loan

While reverse mortgages offer many advantages, it’s important to weigh the potential drawbacks:

1. Higher Costs
   Reverse Equity Loans often come with higher interest rates, administration fees, and legal costs compared to standard home loans. Interest compounds over time, increasing the total repayment amount.

2. Reduced Inheritance
   Since the loan and accrued interest are repaid from the sale of your home, there may be less left for your heirs.

3. Property Conditions and Requirements
   To qualify, you must live in the property and maintain it in good condition. Renting out the property is typically not allowed.

4. Equity Risks
   If property values decline, your available equity may decrease, limiting future borrowing potential.

5. Valuation Costs
   A Registered Valuation Report is required before funds are advanced. Lenders may also request updated valuations during the life of the loan, which are at your expense.

Eligibility Criteria for Reverse Equity Loans

To qualify for a Reverse Equity Loan in New Zealand:

• You must be 60 years or older.

• The property must be your primary residence.

• You must maintain the property’s condition as per lender requirements.

• The property cannot be rented out.

The amount you can borrow depends on factors like your age, the property’s value, and the lender’s specific criteria. Generally, the older you are, the more you can borrow. The above is not an exhaustive list so contact us now if you would like to know more.

What Happens to the Loan When You Pass Away?

Upon the borrower’s death, the loan, accrued interest, and any fees are repaid from the sale of the property. Any remaining equity goes to your estate. This could reduce the inheritance left for your family, so it’s crucial to consider the long-term impact.

Why Choose Mortgage Field for Your Reverse Equity Loan?

At Mortgage Field, we prioritise transparency and personalised advice. Before you commit to a Reverse Equity Loan, we ensure you fully understand:

• How the loan works with your chosen lender.

• All charges, fees, and conditions associated with the loan.

• Our commission structure – what we get paid.

• Interest rates (fixed or variable) and how they affect your loan.

• Your responsibilities regarding insurances and property maintenance.

We strongly recommend seeking independent legal advice to ensure this product aligns with your financial goals. We will not proceed with your loan application unless you and our team are confident it’s the right fit for you.

Get in Touch for Expert Advice on Reverse Equity Loans

Unlock the value in your home with confidence. Contact Mortgage Field today to discuss how a Reverse Equity Loan can support your retirement plans.

Disclaimer: This information is provided as general guidance and does not constitute financial advice. Please consult a licensed financial adviser before making any financial decisions.