REST HOMES AND RETIREMENT VILLAGES:
Call us early for free initial advice:
Your choice of a rest home or retirement village will govern the kind of agreement you actually sign. Call us early for advice. We specialise in elder law. Your initial interview is free and you get a 10% discount off our legal fee if you have the government SuperGold card.
We will ensure that you understand the advantages and disadvantages before you decide to sign the agreement to enter into the rest home or retirement village you are looking at. We will also take care of the legal documents with you.
For retirement villages:
The Retirement Villages Act 2003 provides residents with certain rights and outlines the responsibilities of village operators. There will be village rules and/or codes of conduct. In addition to the obvious right to live in your villa, unit or apartment, other rights and obligations under the agreement should be carefully considered and understood. These might include whether friends and relatives can stay, sub-letting if you go away for a period, keeping a pet, alterations, and your wishes on re-sale when you leave.
The Occupation Rights Agreement:
This sets out your particular occupation rights and obligations to the village you have chosen. You will not usually own the villa, unit or apartment. You may well be purchasing a right to occupy the space for as long as you need it. It is a personal right, created by the agreement you sign. It may be secured by a registered title, but you are not usually able to mortgage it or register other interests such as a caveat.
You will be required to sell back this right to the village owner when you leave, though you may help them to market the property to someone new. Since an occupation right is personal to you, it may or may not be owned by a family trust. You may not be entitled to any capital gain from the sale of the property, but you may have to make up the difference to the village owner if the place sells at a capital loss on the original purchase price.
The occupation agreement will have obligations in respect of the interior space. It will advise whether you pay for interior maintenance and repairs and whether you must pay refurbishment costs on termination. There are insurance obligations, the place being insured by the village owner, with your interest noted on the policy.
Later, you may want to transfer within the village, to another dwelling or a serviced apartment. You will usually terminate your existing occupation rights agreement, with the amount repaid to you put towards the amount you pay for the new dwelling, at its current market price. The sum repaid may not be enough to purchase the new occupation rights if the market price of dwellings in the village increases and you may have to make up the difference. So it is a careful selection process whenever you enter or leave accommodation within the village. We are there to help you through the process.
There will be a village outgoings fee payment, made up of compulsory elements such as insurance and fixed services and voluntary elements for the services you wish to add. Administration charges for goods or services supplied are charged through the village. You can choose medical care on a user pays basis. Utility charges relating to your place such as electricity, gas, telephone/tolls etc are not usually included in the village fee. The fee is usually payable monthly and subject to cost increases. The obligation to pay often continues after termination of the occupation licence for either 6 months or until resale.
Retirement Villages, require you to have current Enduring Powers of Attorney as to care and welfare and a valid Will in place before you enter the Village. We can prepare these for you.
Reverse mortgages, home equity loans, home equity lines of credit:
If you own a home, but not have much income to live on – sometimes called “asset rich and cash poor” then you may be able to borrow money, using your home as equity.
When people hit 65 they may still have 25 to 30 years of living to fund, thanks to increased life expectancies. A high proportion (approx. 60%) of those aged 65 and over depend entirely or largely on NZ Superannuation for their income. As a result, money can be tight, especially when unexpected expenses come up.
There are bank loans available if you qualify, so that you can live at a more comfortable level in your own home, and have sufficient funds for other expenses, whether it be home improvement, a car, a holiday or an unexpected expense that crops up and you would not otherwise be able to pay for it.
Each loan type has advantages and risks. You need to think carefully about your options and take legal and other advice before you commit to any of them. Each loan method has upsides and downsides and any such loan is a calculated risk.
We can assist you with your choices, your decision-making and with the documentation.
This type of loan can have monthly payments, lump-sum payments or a combination of the two. It is a deferred repayment loan due as soon as the borrower fails to pay property taxes and/or insurance, the home falls into disrepair or the borrower moves out for more than a year, sells the home or passes away.
The loan is typically repaid through proceeds from the sale of the house. You must be at least 62 and own the home outright or have a small mortgage balance. There are no income requirements but lenders must check to see if you are capable of making timely and full payments of your outgoing property charges such as taxes, insurance, homeowner’s association fees etc.
Reverse mortgages benefit you when property prices are rising and interest rates are relatively low. But when the reverse happens the value of your equity can be rapidly reduced. They are not ideal for everyone. There may be other options. Get independent legal advice. Discuss with your family.
In 2008 the Ministry of Social Development developed a code of standards for reverse mortgages, but it is voluntary and not legally binding. Its standards include lifetime occupancy, no negative equity and clear explanations of the conditions, charges, costs and responsibilities, independent legal advice before you sign up, access to an independent complaints service.
Like a reverse mortgage, a home-equity loan lets you convert your home equity into cash. A home equity loan is a mortgage loan where you receive a loan as a lump-sum payment and make regular payments off the principal and interest, usually at a fixed rate. There is no age requirement and you must have at least 20% equity in the home. You must have a good credit score and proof of a steady income sufficient to meet all financial obligations.
Home – equity loan line of credit (“Heloc”):
Another type of home-equity loan is the home equity line of credit or Heloc. The line of credit is on an as-needed basis, up to a pre-approved credit limit. You have a credit/debit card and/or a chequebook so you can withdraw money as needed. Monthly payments are based on the amount borrowed and at the current interest rate. There is no age requirement but you must have at least a 20% equity in the home. You must also have a good credit score and proof of a steady income sufficient to meet all your financial needs.
Heartland Bank offers reverse mortgages under its own name. SBS Bank offers its Advance loan. There may be other lenders. Both named banks have cooling off periods.
For more information about this topic please refer to the NZ Government website – http:govt.nz/browse/housing-and-property/borrowing-against-the-value of-your-home. We acknowledge several extracts from this website used in this information sheet.