As more and more New Zealanders begin to reach retirement age, a high percentage will expect to depend entirely on superannuation savings to fund the next 25-30 years of their life. Money can therefore become tight, leading homeowners to look increasingly towards their property to provide the extra funds.
Selling off land through subdivision has been gaining traction, as has the “home equity release” – or reverse mortgage. This lesser-known product hasn’t yet formed a large part of the average mortgage broker’s business, however according to specialist bank Heartland, it is likely to gain some solid prominence in the retiree market in the coming years.
“A reverse mortgage is fairly similar to a standard mortgage, but it’s been designed for retirees and there are no regular repayments,” said Lisa Hatfield, senior manager retail at Heartland Bank – a specialist bank which is currently the largest provider of reverse mortgages in New Zealand.
“The interest on the mortgage compounds over time, and the repayment is due when the owner moves out or the house is sold, usually after they pass away,” she explained. “Heartland bank funds the reverse mortgage product with its own money, so for us, this is a long-term loan scenario.”
Unlike the Australian process, Hatfield says handling a reverse mortgage in New Zealand is fairly simple. Heartland handles the loan work in its entirety, and operates on a referral-only basis.
“If a broker runs into a customer for whom this product might be a good fit, they can simply refer it to Heartland bank, and we pay the full fee,” Hatfield explained. “This method may change in the future, but now we’re in a position to tell brokers – ‘this might not be your core business, but you will almost certainly run into situations where you have a customer that this product could help.’ If that happens then they can get in contact, and we will take the customer through the process for them.”
Hatfield says the number of brokers contacting Heartland about reverse mortgages has increased along with demand for the product, and that brokers are likely to see it become an increasingly prevalent part of their business.
“We’ve placed ourselves in the market as being a niche specialist bank, and we are currently the largest provider of reverse mortgages in New Zealand,” she stated. “We’re anticipating a lot more enquiries in the coming years.”