Reverse mortgages are gaining popularity as an option for individuals over 60 to access funds by borrowing against the value of their home. Repayment of the loan, along with interest, typically occurs only when the property is sold. However, when it comes to properties in retirement villages, the rules surrounding reverse mortgages are quite different.

What Is a Reverse Mortgage?

A reverse mortgage allows homeowners to borrow money against the equity in their home without needing to make repayments until the property is sold. To qualify, the home must generally be mortgage-free or nearly so, and the amount you can borrow depends on your age and the property’s value.

While reverse mortgages can provide financial flexibility during retirement, they require careful consideration. Consulting with an expert is essential to ensure this option aligns with your financial goals.

Reverse Mortgages and Retirement Villages

Retirement village properties are governed by Occupation Right Agreements (ORAs), which differ significantly from standard property ownership. When you move into a retirement village, you don’t purchase the property outright. Instead, you acquire the right to occupy the property for your lifetime or until the ORA is terminated.

Because the village retains ownership of the property, residents have limited rights compared to traditional homeowners. This distinction has a direct impact on reverse mortgages:

• No Property Ownership: Since residents don’t own the property, they cannot use it as collateral for a mortgage.
• Restrictions in ORAs: Most Occupation Right Agreements explicitly prohibit residents from mortgaging their interest in the property, including reverse mortgages.

Alternative Options for Retirement Funding

If you’re considering a reverse mortgage but live in a retirement village, it’s important to explore alternative financial solutions. Speaking with a legal expert can help you understand your options and develop a retirement plan tailored to your needs.

Seek Expert Advice

Before proceeding with a reverse mortgage on any property, consult with experienced legal and financial advisors. They can help determine whether it’s the best choice for your circumstances and identify other potential avenues for funding your retirement.

For residents in Masterton and Wellington, trusted law firms offer fixed-price initial consultations to help clients navigate complex decisions like reverse mortgages and retirement planning.

Need guidance on the RMA changes or their implications? Contact Core Legal Wellington for expert advice tailored to your needs.