The rules are short. You need to be 60, you need to own a conventional house worth at least $250,000, and the lender needs to be the only mortgage on it. Most of the complexity sits in the exceptions, and the exceptions are where I spend my time.
The Minimum Age Is 60, With Some Fine Print For Couples
Both Heartland and SBS set the minimum age at 60. For couples, lenders work from the age of the younger borrower, because that is the person likely to be in the house longest.
Heartland may allow one borrower aged 55 to 59 where the other borrower is over 60, with the borrowing limit calculated from the younger age. In practice that means a 58-year-old partner brings the limit down to 18 percent of the home’s value rather than the 20 percent a 60-year-old would get. SBS requires every nominated resident to be 60 or over.
A spouse or partner who lives in the home must be a party to the loan, so that the lifetime occupancy promise protects them too. Other occupants, an adult child living at home for instance, can stay, but Heartland asks them to sign an acknowledgment that the lifetime occupancy promise does not extend to them. If the borrowers both leave or die, that person will need to move out when the house is sold.
What The Property Has To Be
The lenders’ language is similar: a residential property of conventional construction, in good repair, that is your primary place of residence. Each phrase carries weight.
Residential. A house, a townhouse or, with more scrutiny, an apartment. Commercial property and bare land are out.
Conventional construction. Timber-framed, brick, block, weatherboard, plaster over block. Non-standard builds, relocated dwellings and homes with known weathertightness problems may be declined or require a full valuation.
Good repair. The valuer reports on condition. A home that is habitable but tired is fine. One with a failing roof, rotten joinery or an unconsented extension may be declined until the work is done, which is awkward when the loan was meant to pay for the work. I have seen this resolved by staging the loan, but it needs careful handling with the lender.
Primary residence. Both lenders start from your own home. Heartland also offers a Secondary Property Loan against an investment property, second home or holiday home, at a lower borrowing limit. SBS generally does not.
Freehold, or clearable by the new loan. If there is an existing mortgage, the reverse mortgage must be large enough to repay it in full. The lender will be first and only mortgagee. A second mortgage, a caveat or a charging order will need to be cleared first.
Minimum Property Values And Location Rules
Heartland’s published minimum property value is $250,000, and the brief Oliver works from gives SBS the same floor. Few owner-occupied homes in Auckland fall below it, but it matters for baches, small-town properties and some apartments.
Location criteria are the quieter restriction. Both lenders can decline or reduce lending on properties in areas they consider hard to sell, which tends to mean small or remote towns and some rural districts. Heartland’s own statistics show 48 percent of its reverse mortgage customers are in Auckland, with Canterbury and Wellington next; the further you are from those markets, the more the location question matters.
Owning With A Trust, A Partner Or Family
Family trusts. Many homes on the Shore are held in trusts set up in the 1990s and 2000s. A reverse mortgage can be arranged where the trust is the owner, but the trustees must all agree and sign, the trust deed must allow the borrowing, and the beneficiaries’ position needs to be considered. It takes longer and your solicitor will have more to do. In some cases it is simpler to wind the trust up first, which is a decision for your lawyer, not for me.
Couples. Both must be borrowers. If one of you is under 60, see above.
Co-owning with a child. Where an adult child is on the title, they would need to be party to the loan, and lenders are cautious because the child may be well under 60. These arrangements are usually declined or restructured.
Life interests and estates. If you occupy the home under a life interest from a late spouse’s will, you may not own it in the sense the lender requires. Your solicitor can tell you.
Credit History And What Lenders Check
There is no income test, because there are no repayments. There is still a credit check, and a history of defaults or a current bankruptcy will usually mean a decline.
Lenders also want to see that rates are paid up to date and the house is insured, and both of these become ongoing conditions of the loan. If the lender ever has to pay them on your behalf, the cost is added to the balance.
Identity checks under the AML rules apply as they would for any lending, so you will need current photo ID and proof of address.
Checking Eligibility Before You Apply
Most people can tell within five minutes of a phone call whether they qualify, and the people who cannot are the ones with trusts, apartments, lifestyle blocks or a partner under 60. Those are worth a conversation before anyone pays for a valuation.
I run that check as part of the first conversation, and I can tell you where Heartland and SBS differ for your situation, because they do. The advice page sets out how it works. For the age-based borrowing limits once you qualify, see how much you can borrow.
