Property law and borrowing by retired people
Strict income criteria often disqualify potential borrowers who are asset rich but income poor. This can lead to a retired couple selling their family home earlier than necessary simply to free up funds for their retirement.
An alternative opportunity exists when the family members provide back up to the loan arrangement, either by way of a limited guarantee or as a co-borrower. The co-borrower accepts an ongoing obligation to pay a small monthly contribution to the interest costs of the loan. The loans are taken out on an interest only basis, the intention being that the capital sum would not be repaid until the couple sold the dwelling and moved to alternative accommodation.
This type of lending is different from Reverse Annuity Mortgages which compound interest increasing the debt. The family retirement loans described above are on a pay as you go basis and are available from the Napier Building Society for borrowers who live in Hawke’s Bay.
For further information on family retirement loans, please contact our property team or the Secretary of the Napier Building Society (ph. 06 831 0230).
Guides to the law
Here are links to the New Zealand Law Society law awareness pamphlets.