Frequently Asked Questions
So, why is the Police Credit Union offering reverse mortgages?
We always look to provide members with products and services that are useful to them.
We surveyed members back in 2021 about whether they might be interested in reverse mortgages. The survey was a real eye-opener as it confirmed that some members were doing it tough in retirement and would consider using a reverse mortgage. However, some members were also very wary of these products.
As we’ve designed our product, we’ve taken that feedback into account to ensure we potentially have the most member-focused reverse mortgage in NZ.
Why would I want a reverse mortgage?
A reverse mortgage is not for everyone which is why we strongly recommend you speak with family and take legal and financial advice.
Typically, they suit those who have sufficient equity in their home or are mortgage-free; understand the loan will increase over time with compounding interest which reduces the equity in the house; need access to cash to fund retirement and have limited or no access to other lending options.
How do I know if a reverse mortgage is right for me?
You’ll need to weigh up lots of factors before deciding whether it’s right for you.
This is why we strongly recommend you speak with your family and take legal and financial advice before committing to a product like this.
I’ve heard nothing but bad press about these types of loans including people losing their homes. What do you say about that?
We’ve heard those stories as well. Our product is designed with members first and foremost in mind. It’s why we:
- Only allow you to borrow the lesser of 20% of the value of the property or $100,000
- Only charge interest annually rather than every month to keep the interest costs down.
- Charge the lowest interest rate in New Zealand.
- Have two guarantees
- Guarantee #1: Lifetime occupancy. You continue to own and live in your home for as long as you choose.
- Guarantee #2: No negative equity. The loan amount will never exceed the net sale proceeds of your property. This means that if there’s not enough money left from the sale of your home to repay your loan, there is no requirement for the shortfall to be paid.
Who is eligible for Retire Easy?
Members (or those eligible to be Police Credit Union members) aged 70 years and older who are either mortgage-free or wish to use the new loan to pay off their current loan.
What happens if my spouse/partner does not own the home?
If you have a spouse or partner living with you who does not own the home, they can be added as a ‘Nominated Person’.
What is a 'Nominated Person'?
Up to two (2) people can be nominated to live in the property the loan is held over (“Nominated Person”). Each Nominated Person must be aged at least 70 years when the loan is first drawn down.
Examples of a Nominated Person include property owner(s), borrower(s), spouse, or partner. Subject to Police Credit Union approval, a Nominated Person can be changed during the loan term to include, for example, carers for the elderly.
The loan does not need to be repaid until the last Nominated Person leaves the property. Other persons may reside in the property however they do not have the same rights as a Nominated Person
How much could I borrow?
The lesser of $100,000 or 20% LVR. The LVR (Loan to Value Ratio) is calculated by taking the loan amount then dividing by the value of the security offered. e.g., a loan of $100,000 divided by a property with a value of $750,000 = LVR of 13.3%
When do I have to repay my reverse mortgage?
Your loan is typically repayable when the last Nominated Person moves permanently from the home; this could occur when property is sold, a move to long-term care, or the person passes away.
What if I am not the only property owner?
Both owners need to be aged 70 or older, and both must be borrowers.
What if I move house?
Let us know your plans as soon as possible. We may be able to transfer the loan to your new home depending on the value and suitability of your new home. Otherwise, the loan will need to be repaid when you sell your current home.
Can I lose my home with a reverse mortgage?
As with a standard home loan, this would be extremely unlikely. Remember we have 2 guarantees: (1) all nominated persons who occupy property when REM loan is established are guaranteed occupancy until they pass away, or the home is sold and (2) that the amount required to repay the loan will never exceed the net sale proceeds of the property.
What if I want to make a compliment or complaint?
You can send your compliment by secured bank messaging within Internet or Mobile Banking applications, or;
- By phone: 0800 429 000
- By email: firstname.lastname@example.org
- Via our website: policecu.org.nz/about-us/contact-us/
You can find information on making a complaint here.
How could this affect my children’s inheritance?
By their nature, reverse mortgages continue to grow over time given no repayments are required during the life of the loan. As the loan increases, the equity available on the property typically decreases, unless the value of the house continues to increase faster than the value of the loan. Given this, you, and your family (particularly those who may inherit) should discuss the loan and also take independent legal and financial advice.
What does Consumer NZ think about reverse mortgages?
Consumer NZ reviewed reverse mortgages in 2017. We recommend you read their review as part of your research. You can find it online at: https://www.consumer.org.nz/articles/reverse-mortgages
Question not answered?
There's more Frequently Asked Questions in our Retire Easy Brochure.