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Reverse mortgages an option for struggling borrowers: Heartland

Reverse mortgages, rather than mortgage deferrals, could help borrowers deal with the financial fallout of Covid-19, says Heartland Bank head of retail Andrew Ford.

Thursday, August 20th 2020, 5:25PM 3 Comments

After the Government extended its mortgage deferral scheme for hard-up borrowers to March 31 this week, home loan customers can opt to pause payments on interest or principal payments with their bank. Yet reverse mortgage specialist Heartland says brokers should also consider equity release products as they weigh up their options.

Ford believes reverse mortgages could prove a better option for borrowers over 60 who may have lost their job during the pandemic. 

"It might offer them a permanent solution, giving them flexibility and peace of mind," Ford told TMM Online.

Ford said brokers "spent a lot of time and effort helping customers" when the mortgage deferral scheme was first announced, and said a reverse mortgage could be "another tool" to engage customers with.

Heartland said "the relief may only be temporary" for some borrowers, while for those without income, "the deferral may not be an option at all". 

More customers in New Zealand have turned to reverse mortgages in recent years according to Heartland's accounts. The firm's reverse mortgage book grew by $26 million to $536 million in the six months to December 2019.

Reverse mortgage products allow customers to release equity in their home in the form of a loan, which is paid back to the bank when the house is sold or the last occupant has left the home. 

Heartland believes older homeowners, particularly those reliant on part-time work, could be faced with a stark choice over the coming months. 

"In the absence of a mortgage deferral scheme or a reverse mortgage, older borrowers may have no choice but to leave their home," the bank said. 

Tags: equity release Heartland Lending reverse mortgages

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Comments from our readers

On 21 August 2020 at 10:29 am Team@KML said:
I have a question for Andrew - would he recommend this solution for younger borrowers? I thought their Reverse Mortgage product was designed for older customers?
On 21 August 2020 at 1:47 pm Veteran Charles said:
Yes, this is exactly right. As a broker you know that it is hopeless going to a bank for retired borrowers on low fixed incomes, the banks just dont want to know. Reverse mortgages can be a great solution. Particularly in today's World where the kids are often much better-established than the parent and have no reliance on the parents' property being passed down to them. The product is in fact more flexible that what this article was able to cover.
On 24 August 2020 at 8:11 am Andrew Ford said:
Hi Team@KML,
Heartland's Reverse Mortgage is available for homeowners who are 60 and over. Our customers are typically retired but we are seeing some who were servicing a small regular home loan but are now no longer able to do so.
Regards,
Andrew

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 3.85 3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 ▼2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 3.05 3.19 3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.55 2.69 2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.15 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.00 3.13 3.02

Last updated: 21 September 2020 10:48am

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