Retiring

We’re separating. What will happen to our family home and... We've split. What happens to our property?
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I can’t afford to stay in my home. Is a reverse mortgage the answer?

Relying on limited income from NZ Superannuation or other investments can make money tight, especially when unexpected expenses occur. A reverse mortgage is a way of unlocking some of the wealth that may be tied up in a home.

Typically, a lender such as a bank will pay the homeowner a proportion of the equity of the house and this will be registered as a loan against the property. There won’t be any repayments required, but interest on the loan will be accrued until the property is either sold, or the owner dies.

A reverse mortgage can be a good way for retired home owners to access some of their saved wealth, but it is important to consider all the implications:
  • Borrowing against your home may leave you with too little equity in the future, affecting your financial capacity to move into supported accommodation
  • The impact of compounding interest could result in a small loan becoming much larger, putting you under increased financial pressure
  • Receiving a lump sum payment may prevent you from properly adjusting your lifestyle to your post-retirement reduced income, meaning you spend too much and leave yourself in financial difficulty when the lump sum runs out
  • You could end up in a position where you are unable to leave an inheritance to your children or other family members
Make sure that you consult a financial advisor or lawyer before signing any documentation.  It's also a good idea to discuss implications with your family.
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