Pensioners owning their own home can be equity rich but cash poor, and the increasing cost of living has driven more to seek options such as reverse mortgages to cover repairs and maintenance.
Age Concern Nelson Tasman manager, Caroline Budge, says it’s worrying for many people living on a pension without a financial cushion to cover inevitable repairs and maintenance costs.
“You might not have a mortgage anymore, but you still have a lot of monthly expenses. You still have to pay your power, internet, insurance, rates and ongoing repairs and maintenance. Some people do the reverse mortgage if they want to fund a big piece of repairs and maintenance on their house.”
Heartland Bank chief executive officer, Leanne Lazarus, says interest in reverse mortgages continues to grow nationally and in Nelson Tasman, with recent data showing most people will spend their freed-up funds on home improvements.
While reverse mortgages have had a bad rap in the past, she says there are safeguards in place these days, including a no-negative-equity guarantee, plus the promise to people they can live in their home as long as they choose without making any loan repayments until the end of the loan.
“Typically, those who take out a reverse mortgage are seniors who have built up equity in their home but need extra funds to live a more comfortable retirement. Unless you have family who can help, there are very few options to increase your cashflow without selling your home.”
Leanne says it’s just one of a suite of options available for older Kiwis, especially as living costs have outpaced fixed-income increases.
“What we’re seeing is Kiwis aren’t able to rely on their pensions these days to fund a comfortable retirement.”
She says there are a few factors at play as to why this isn’t necessarily working for many, and that is reflected in more seniors making enquiries about reverse mortgages.
Caroline says they know anecdotally that many people are working beyond 65 now, and while there are those simply not ready to retire there are also people who feel they don’t have a choice. Age Concern members pay $25 a year for membership and she says that can provide seniors with a list of approved tradespeople. It doesn’t alter the cost, but it provides peace of mind for those needing to find someone to make repairs in their home.
For help with funding repairs and maintenance, she points them in the direction of the Ministry of Social Development (MSD). At MSD, group general manager for client service delivery, Graham Allpress, says there is an eligibility criteria, including income and asset limits which are outlined on its website. He says every case is considered on a case-by-case basis. Repairs and maintenance need to be essential to maintain the house and property to a habitable standard; should meet the client and family’s housing needs and all costs claimed must be verified.
