The village has a unit available now. The house will take three months to sell. The deposit is due in ten days. This is the moment many families first ask about using the equity in the home, and a reverse mortgage is usually the wrong answer to it.
Here is what the right answers look like.
Why Timing Is The Problem: Buying In Before The House Sells
Most retirement village units are sold under an occupation right agreement, not a freehold title. You buy the right to live there, typically paying a capital sum up front, and the operator keeps a deferred management fee of 20 to 30 percent when you leave. Because you do not own the unit, no lender can take a mortgage over it, which is why neither Heartland nor SBS will write a reverse mortgage on a village unit.
The problem is the gap. Villages rarely hold a unit for months while a house sells, and selling the house first means somewhere to live in between. Families often end up either rushing the house sale at a discount or borrowing short-term to secure the unit.
Lender Products Built For Retirement Village Entry
Heartland’s Village Access Loan is designed for exactly this gap. It is a loan secured against the family home that funds the village entry payment, with the loan repaid when the house sells. Interest accrues in the meantime but there are no repayments. It is a bridging product, not a reverse mortgage, and it has its own rates, fees and terms which Heartland publishes separately.
Where the house is going to be sold within months, a Village Access Loan or a standard bridging facility is usually far cheaper than setting up a reverse mortgage, paying a $920 arrangement fee and a valuation, and discharging it almost immediately.
Where the intention is to keep the family home, perhaps for a partner who is staying, and the village entry is for one spouse, a reverse mortgage on the home may be appropriate, because the loan will run for years rather than months. The surviving partner’s lifetime occupancy is protected and the village payment is funded from equity without a sale.
Funding Home Care So You Can Stay Longer
The use of home equity I see most often around care is the opposite of moving: paying for help so that moving is delayed. A few hours a week of home help, a gardener, a nurse visiting, a stairlift, a wet-floor bathroom.
A reverse mortgage with a monthly advance or a reserve suits this well. Interest is only charged on what is drawn, the amounts are modest, and the purpose is to stay in the home the loan is secured against. Heartland lists medical costs and aged care among the common uses and the product is designed for it.
Before borrowing for care, check what is funded. A needs assessment through Health New Zealand can unlock funded home support, and the Disability Allowance can contribute to ongoing costs. Borrow for the gap, not the whole.
What Happens To The Loan When The House Is Sold
If a reverse mortgage is in place and the last borrower moves permanently into a village or into care, the loan becomes repayable, with Heartland allowing up to twelve months. The house is sold, the loan and interest are repaid from the proceeds, and the balance funds the village entry or the care costs.
Where one partner moves and the other stays, the loan continues unchanged. Where both move, the twelve-month window gives the family time to sell properly. The article on repaying, selling and moving into care covers the mechanics.
The Residential Care Subsidy Question
Long-term residential care in New Zealand is means-tested. For a single person, the family home counts as an asset above the threshold; for a couple where one partner stays at home, it is exempt. Cash held in the bank, including money drawn from a reverse mortgage and not spent, is an asset. Gifts to family in the years before applying can be counted.
A reverse mortgage can affect the assessment in both directions and the rules are detailed. I cannot advise on entitlements and I do not try. Work and Income assesses the subsidy, and where it is not available, administers a Residential Care Loan secured against the home. Ask them how a reverse mortgage would be treated for your household before you borrow, if care within a few years is a realistic prospect.
Mapping The Move Before You Commit
The useful sequence is: find out what the village requires and when; find out what the house is worth and how long it will take to sell; decide whether the home is being kept for a partner; then choose the product that fits the timeframe. Bridging for months, a reverse mortgage for years, and in many cases simply a well-timed sale with no borrowing at all.
That is a conversation I have regularly with families on the Shore, often with the village’s sales manager on the other end of the phone. Book a chat before you sign anything with the village; the advice page sets out what I can and cannot help with.
