Many New Zealanders relying on the safe and conservative investment option of bank deposits have found returns declining as interest rates have fallen.

The interest and principal can be paid off if the borrower has the means to do so, otherwise it will need to be paid once the home is sold or the last remaining nominated resident living in the home passes away.

As this has implications for remaining family members, independent legal advice is a mandatory requirement. The death of a loved one is an extremely emotional time, and it needs to be clear to the remaining family members that a percentage of the home’s value is tied up in mortgage lending.

“People who are taking out a reverse equity mortgage need to understand the product and the implications both to themselves and potentially those that may claim against their estate,” says McLean. “This is why we ensure they have independent advice from a family lawyer, for example, so the borrowers understand these implications and can discuss them confidently with their family if they wish.”

While there are set borrowing limits for each age group, the full amount doesn’t need to be borrowed immediately. If, for example, you are 70 and own a home that’s valued at $500,000, you are entitled to borrow up to $125,000 (25 per cent of its value). But you may want to borrow a smaller amount (say $75,000).

If you have already been through the initial application process, which can take around one week, it can be much simpler to access any extra lending available for your particular age group, McLean says.

“You can set up your loan with a limit, even if you don’t want to initially borrow that amount. This limit could cover future known borrowing requirements but also funds for things that you don’t know about yet (e.g. urgent surgery). If you find you are needing more money, you can call SBS or pop in to see us and we can quite easily arrange this.”

In the wake of Covid-19, the housing market is likely to be volatile, which may put downward pressure on house prices for those wishing to sell. Offering the means by which to stay in your own home while maintaining a high quality of life, Unwind by SBS is an alternative worth investigating. If you are seeking more information on SBS’ reverse equity mortgage – SBS Unwind – your eligibility and whether it would be suitable for you, along with copies of Standard Contract Terms and Reverse Equity Mortgage Fees and Charges.