Why a reverse equity mortgage could give you options if you’re over 60

Here’s how homeowners can release their home’s value without needing to sell it.

Life in modern New Zealand is expensive. Power, water, and rates bills can mount up, and older people dependent on a pension may find it hard to make ends meet. The Covid-19 pandemic and associated lockdown has brought its own set of economic problems. Thousands of New Zealanders have lost their jobs recently, and the predicted financial downturn could last for years.

People living on a fixed income are often hardest hit by economic troubles. Those aged 60-plus, who are living in their own homes but living frugally, may find themselves tempted to sell so they can access more cash to cover their needs or help those close to them. This isn’t ideal, however. Selling the family home can be harrowing and due to COVID-19, the housing market is likely to be volatile for some time, which may put downward pressure on house prices for those wishing to sell.

Enter SBS and their reverse equity mortgage SBS Unwind. The customer-owned bank founded in 1869 has developed SBS Unwind as a means by which to allow older New Zealand homeowners to enjoy a comfortable lifestyle in their later years, in their own home.

SBS Bank Chief Executive Shaun Drylie says SBS Unwind reflects SBS’s commitment to provide Kiwis with more loan options. It allows homeowners aged 60 and over to borrow a percentage of their home’s value, with the interest and principal not required to be repaid until the home is sold or the last nominated resident living in the home passes away or moves out.

There is a graduated scale that determines the amount that people can borrow. For example, a 60-year-old is able to borrow up to 15 per cent of their home’s value, while a

90-year-old can borrow up to

45 per cent.

SBS is proud to put its customers’ needs at the forefront. This ethos is reflected in the process by which SBS Unwind is discussed and applications are assessed.

“Our process is a little more cautious,” Drylie says. “We are very careful to talk people through it.”

Most people think of loans as something you pay off over time, with the amount borrowed getting smaller. A reverse equity mortgage works the opposite way; the loan will grow bigger as the interest compounds with repayments not being required until the last Nominated Resident, someone who is allowed to live in the house, leaves the property. This being so, it’s important for anyone considering a reverse equity mortgage to fully understand how it works.

Understanding is integral to the discussion SBS has with applicants for this product and a key reason for requiring applicants receive independent advice from their solicitor.

If the application is successful, the loan amount can be drawn down on a flexible arrangement, with interest compounding on a regular basis. The loan can be repaid at any time, if there is the means. Otherwise it will need to be repaid when the repayment conditions are triggered.

The loan information can be accessed anytime by the customer using the SBS Bank mobile app, through internet banking, or over the phone.

SBS is a national bank, with services accessed by customers through 14 branches across the country, internet banking, an extensive broker network, and a New Zealand-based contact centre, which means SBS Unwind is available to customers anywhere (subject to eligibility criteria).

“SBS Unwind is an excellent option for people wanting to stay in their own home while enjoying more financial freedom,” Drylie says.

For more information about SBS’s reverse equity mortgage – SBS Unwind - and whether it would be suitable for you, along with copies of Standard Contract Terms and Reverse Equity Mortgage Fees and Charges, visit sbsbank.co.nz or call 0800 SBS BANK (727 2265).