Source: Radio New Zealand
Jo Murphy says she very much regrets moving into a retirement village as early as she did.
She said she sold her freehold home at least 15 years too soon.
“It was a neat little brick home on a nice quiet side road in Waikanae… the garden and the drive took hard work to keep tidy but I was fit and well, I had established some beloved plants. The labour – with hindsight – was beneficial and the property looked good too.
“Maybe I was simply lonelier than I thought … I had lots of activities so I didn’t put my finger on it being loneliness.
“I badly wanted to take that reverse mortgage but I also was thinking about my daughter who’s clued up on finances. She was a senior dealer for a while in the money market, and I could feel her disapprobation… so I stalled.”
She has since moved through three retirement villages in two parts of the country and said her capital had been eroded to the point where she could not buy another home if she left. The villages charged an initial fee for an occupation right agreement as well as ongoing fees.
“I had no idea until I wasn’t in my own home how much agency you lose in your day-to-day life. A lot of decisions are made around you. In this particular instance where I am now… I live with their constant vibration.”
She has been distressed by ongoing noise in her unit but was not able to do anything about it.
Planned work had not happened as promised, she said. Other people who were considering making a similar move need to think about what they were giving up, she said.
It is something that many people around the country are weighing up, particularly if they have built up good levels of equity in their homes but are struggling with the rising cost of living.
Property law expert Joanna Pigeon said people who were “asset rich and cash poor” often found it tough to stay in their homes when the cost of rates, insurance and other expenses increased.
But she said there were things to weigh up, whichever path someone took, and there could have been drawbacks if Murphy had opted for the reverse mortgage.
Heartland, for example, charges a variable interest rate – currently 7.75 percent – on reverse mortgage lending. This compounds because repayments are not made until the property is sold. Pigeon said this could mean equity reduced quickly.
“I would encourage people considering whether to have a reverse mortgage to have legal advice, and to also if suitable discuss with their family. Sometimes family members may prefer to assist if they can to assist with the preservation of equity in a property.
“The decision whether to go into a retirement unit or remain in a home with a reverse mortgage will always depend on age, stage and health situation. Care may be required at a later date, and if equity is eroded by a reverse mortgage it may reduce options if say a fall necessitates care needs etc. It is impossible to have a crystal ball for potential needs in the future. These potential issues need to be discussed and a decision made in the circumstances. Reverse mortgages are a product to enable a person to remain in their home, but the pros and cons need to be weighed up.”
Retirement Village Residents Association president Brian Peat said he chose a retirement village because he needed to find something quickly when he returned from Queensland.
He said it was not common for people to regret moving into a village but it was a “huge step into the unknown” for residents.
“”It is certainly a different lifestyle and some adjust but others don’t.”
Michelle Palmer, executive director of the Retirement Villages Association, said there were about 53,000 people in retirement villages around the country and 130 moved in every week.
“However, we recognise village living isn’t for everyone. That’s why we encourage anyone considering a move to visit different villages, talk to residents and have conversations with family and friends.
“It is also a legal requirement under the Retirement Villages Act to obtain independent legal advice before signing an agreement. “
She said Murphy’s experience was not typical and she was disappointed and surprised that none of the villages had met her expectations.
“The residents I speak with tell me they value the sense of community, companionship and security villages provide, along with the peace of mind that comes from a low-maintenance lifestyle. They tell me how much they love the village amenities and activities. For many, access to hospital-level care, should they need it, is also an important consideration.
“Some older New Zealanders do choose options such as a reverse mortgage to remain in their home. However, many residents appreciate that in a retirement village, exterior maintenance, lawns, rates and often building insurance are managed by the operator. In many cases, retirement villages also have fixed weekly fees so that provides greater financial certainty.
“As people age, the responsibilities associated with owning a house can become more physically demanding and a financial burden, so having them taken care of provides real reassurance.”
Heartland Bank general manager of retail and reverse mortgages, Will White, said there had been a 15 percent increase in reverse mortgage business in the past six months. There are now more than 26,000 people with a Heartland reverse mortgage.
He said reverse mortgages were popular when prices increased and people had more equity to draw against. They were still popular now, in a weaker housing market, when people struggled with the cost of living and rising rates.
He said people who were under the age of 60 would not be able to access a reverse mortgage. “The earlier you get the reverse mortgage, the more interest you will pay.”
But he said there were many customer protections in place that were not there 20 years ago.
“People rightly have a long memory and there’s this idea that debt’s going to be left to the children, you no longer own your own home… all those things are false but it’s always important for us to make sure we get those messages out there that it’s a different product than people remember.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
