Should I stay or should I go now?

When it comes to deciding whether to downsize or get a reverse mortgage, there’s not one right answer – only a right answer for you.

Downsizing is a common option for New Zealand seniors – either their home is no longer suitable for their level of mobility, it has become too expensive and difficult to maintain, or there is a desire to free up equity in order to maintain an enjoyable lifestyle.

One of the benefits of taking out a reverse mortgage – a choice more and more seniors are making – is that all of these issues can be resolved without having to leave the home.

There are pros and cons to each solution, so it’s worth taking some key factors into account.

Factors to consider

A house is often more than bricks and mortar – it’s a home full of memories, where you feel comfortable and connected. If you are strongly attached to your home and/or community, a reverse mortgage may be a better option as it will allow you to access the funding you need without having to move to an unfamiliar neighbourhood or a smaller space that’s possibly less conducive to family visits.

Another point worth considering is the effort associated with moving, particularly if you are downsizing and need to reduce belongings.

There are also a number of financial implications involved in downsizing. Between agent fees, marketing and more, selling up and moving on can be expensive.

In the current market, the difference in residential property growth may also be relevant – the growth on a lower value property could be much lower than that of a higher value property in dollar terms. In fact, anyone who chose to downsize rather than take out a reverse mortgage in Auckland or Wellington in the past five years is likely wishing they’d decided differently.

However, if upkeep has become too much and you don’t want to use a reverse mortgage to pay someone to help maintain the property, downsizing may be the more appealing option. The important thing is to understand that it’s not your only option!

Conclusion or solution

If you’ve decided that staying in your own home and releasing equity is the right solution for you, Heartland Seniors Finance1 can help. Especially designed for the needs of seniors, its Home Equity Loan2 allows people aged 60 and over to convert part of the equity in their home into cash that can be used for any purpose.

You’re not required to make regular repayments, although you are able to do so at any time2. The loan balance will grow as interest compounds, but it doesn’t need to be repaid until the end of the loan (which is usually when you sell the property, move out, or pass away).

An important point to remember is that you will continue to enjoy full ownership of your home. Just like a regular home loan, a mortgage will be registered on the property as security.

1 Heartland Seniors Finance is a division of Heartland Bank Limited.

2 Heartland Bank Limited’s lending criteria, fees and charges apply.

[This article is one of a series written by Dinniss Communications for Heartland Bank and published on the Grown Ups website]

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