Retirement: the time to make your money work for you

Recently I’ve noticed a particular topic of discussion coming up more and more often: the age of our workforce. New Zealanders are working longer than ever, and as I write, almost 200,000 Kiwi aged 65 or older are still in some form of work – with a third feeling compelled to continue working for financial reasons.

For some people, working is what gives them purpose and a chance to use their skills in something they still enjoy. But for others who are acting out of a sense of necessity, what if there is something that can ease the pressure?

I like to think of retirement as the long-awaited, hard-earned golden years of later life. A chance for people who may have worked their whole adult lives to finally be able to do what they want to do. But I think this ideal is being ripped from within the reach of many – and for some it may not have to be that way.

We’ve got a double-edged sword: increased life expectancies, coupled with increased costs of living. When people turn 65, possibly having worked 50+ years, they could still have 25 or 30 years left of living – but what we’re seeing are more Kiwis feeling they must continue working well past 65, simply to fund their existence.

If you’re a mortgage-free, or nearly mortgage-free, 60+ year old homeowner, and you’re feeling the need to work to fund day-to-day living, a reverse mortgage might be something for you to consider. To be clear, I don’t see my job as selling you a reverse mortgage – but I do see it as making sure you know they’re an option available, so you can talk to your family, financial and legal advisors and make a decision that is right for you. After all, it’s your money and your choice.

You’ve probably already thought about some of the options you have, like selling and downsizing your home, renting it out while you move somewhere more affordable, taking in a boarder or moving into a retirement village.

But maybe none of these options appeal to you. And perhaps you’ve lived in your home for generations, raised your children there and have fond memories and a close-knit community of friends and family that you want to hold onto for as long as you can.

So, what is a reverse mortgage and why might it be something for you to consider?

Firstly, I want to address the elephant in the room. For some, a reverse mortgage has negative connotations. That’s understandable given what happened 30-odd years ago, in the absence of regulated no-negative equity guarantees and the other protections we have in place today.

At its essence, a reverse mortgage allows you to tap into the equity in your home to enable a more comfortable retirement. I like to think of it as pay-back from the hard-earned cash you’ve spent your life working for and put into buying your home.

You can do anything you want to with the funds a reverse mortgage releases – home improvements, travel and holidays, car upgrades, medical expenses, helping friends and family, or simply using it to assist with day-to-day expenses.

For some, it’s about much more than the funds – a reverse mortgage can give you the option of continuing to own and live in your home for as long as you choose, giving you more time to enjoy the lifestyle and social connections you’ve built over the years.

You might be wondering what the catch is.

A key feature to bear in mind is that because you aren’t required to make regular repayments on a reverse mortgage, the loan grows the longer you have it – though any increases in your property’s value may help offset this, and the loan amount is capped at the value of your home. Unless you repay the reverse mortgage earlier, the loan is typically repaid when you no longer want to live in your home, using the sale proceeds of the house.

It’s also worth noting that the standard responsibilities of homeownership continue to sit with you as part of a reverse mortgage. This includes maintenance requirements, as well as paying your rates and insurance. That said, you’ll continue to own your home and, provided you comply with the loan requirements, it is up to you how long you continue living there. If at any time your circumstances change and you decide to sell, you have 12 months from when you move from your home to repay your loan.

I also strongly encourage you to engage in independent advice, to make sure a reverse mortgage would enable you to live as you would like to. We take our duty of care for customers seriously and have a range of safeguards in place to ensure you’re fully informed and well protected when making decisions about whether a reverse mortgage is right for you, and for what you want to do with your money.

If you’ve reached, or are reaching, your golden years and you’re wanting to look at options to fund the lifestyle you’ve worked so hard for, then perhaps a reverse mortgage could be for you. I’m under no illusion this is right for everyone, but I do believe Heartland Bank’s Reverse Mortgage is an option that really can be life changing. A reverse mortgage may be what you’re looking for if you’re working because you have to, instead of because you want to. It may be a chance to let your hard-earned assets do the work for you, so you can live your retirement the way you’ve always dreamed.

For more information on Heartland Bank’s reverse mortgages, visit https://www.heartland.co.nz/reverse-mortgage or contact us at [email protected] or 0800 488 740.

Heartland Bank Limited’s responsible lending criteria, fees and charges apply.
This opinion piece is not financial advice and every person’s situation is different. We encourage you to get financial advice tailored to your circumstances, as well as legal advice, if you are considering a reverse mortgage.