The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions.
Should I sell my current property?
It can be difficult to decide whether to sell your home or not, when you are considering moving to a retirement village or retirement home. Make sure that you've considered all possibilities, and the financial outcomes of each.
Some reasons you might decide to sell your existing family home include:
• You no longer need as much living space as you did and a smaller home would be easier to maintain;
• You’re struggling to cover day-to-day living expenses and most of your wealth is locked up in your home;
• You have good reasons to suspect you would get a higher price from selling your home now than in the next few years;
• Your home is properly prepared and well presented for sale;
• Real estate agents and financial advisors you've consulted are comfortable that selling your home now will help you achieve your financial goals.
I can’t afford to stay in my home. Is a reverse mortgage the answer?
Relying on limited income from NZ Superannuation or other investments can make money tight, especially when unexpected expenses occur. A reverse mortgage is a way of unlocking some of the wealth that may be tied up in a home.
Typically, a lender such as a bank will pay the homeowner a proportion of the equity of the house and this will be registered as a loan against the property. There won’t be any repayments required, but interest on the loan will be accrued until the property is either sold, or the owner dies.
A reverse mortgage can be a good way for retired home owners to access some of their saved wealth, but it is important to consider all the implications:
• Borrowing against your home may leave you with too little equity in the future, affecting your financial capacity to move into supported accommodation
• The impact of compounding interest could result in a small loan becoming much larger, putting you under increased financial pressure
• Receiving a lump sum payment may prevent you from properly adjusting your lifestyle to your post-retirement reduced income, meaning you spend too much and leave yourself in financial difficulty when the lump sum runs out
• You could end up in a position where you are unable to leave an inheritance to your children or other family members
• Make sure that you consult a financial advisor or lawyer before signing any documentation. It's also a good idea to discuss implications with your family.
How much will it cost me to live in a retirement village or a retirement home?
There are many different grades of retirement villages and retirement homes. The higher the quality of the retirement home, the more you'll generally need to pay.
Retirement homes can be purchased outright (but note that the land the home is on is often leasehold), or in some cases can be rented. Before you commit to any financial obligation, seek the advice of a solicitor, lawyer or financial advisor and make sure you completely understand the costs of entry, residency and exit. There is usually a fee charged to move into the property, along with recurring service charges each week you live there. Some retirement villages also request a departure fee when you leave the village. Where they exist, departure fee structures can vary a lot. Make sure that the fee structure you are considering is properly explained.
When evaluating a retirement village or retirement home, ask the sales representative for a comprehensive rundown of their fees and charges. Have this information reviewed professionally and by a family member.
It's important that you calculate the overall affordability of the property for your budget. Affordability is the rent or mortgage payments, along with food, petrol (commuting costs), power, water, rates, and local restaurant prices. As the prices of these items and services vary from place to place, it's helpful to do some research.
Will my pet be allowed to move with me?
Pets can be fantastic companions for people in their senior years. Some retirement villages and homes (but not all) will accommodate both you and your pets.
Policies concerning pets will vary across retirement home operators, but the type of pet, its size, and its temperament are likely to be considered. Villages that have good physical distances between homes are more likely to accept pets than those with housing that is very close to neighbours.
Many villages will let you bring your current pet with you, but when that pet dies will not allow a replacement. Check the policy wording carefully if you’re a pet lover.
Can I buy a retirement property with my KiwiSaver funds?
Once you qualify for New Zealand Superannuation (currently at the age of 65), you also become eligible to withdraw funds from your KiwiSaver account. You can opt for small regular withdrawals to supplement your superannuation, or you can withdraw a lump sum up to your full account balance. All funds withdrawn from the account are tax free.
Withdrawing money from your KiwiSaver account may be useful when investing in a retirement property, but make sure you'll still have enough income available (from KiwiSaver or other investments) to support yourself in retirement.