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Interest Sparked In Home Equity Release

Interest Sparked In Home Equity Release

Television New Zealand’s recent Close-Up at 7 feature on home equity release has sparked a wave of interest in this approach to solving the problem of financial comfort in New Zealanders’ later life.

The Chairman of Sentinel, Mr Boyd Klap, who was interviewed on the programme, says the company has been inundated with requests for more information about home equity release. Sentinel holds 94 percent of the home equity release market in New Zealand.

“It is a relatively new product in New Zealand but is enormously popular in the United Kingdom and the United States. Since Sentinel entered the market in New Zealand 18 months ago, we’ve changed the lives of more than 1500 New Zealanders and settled loans of more than $57 million.”

Mr Klap says the best part of the television exposure has been that many more New Zealanders are now more aware of the fact they do have choices in retirement.

“The New Zealand way of life has always been that you work hard to buy your own home to be mortgage free in your retirement. Then you live on your superannuation and savings. But the reality is, when you look at the low level of superannuation, the cost of inflation and the fact people are living longer, there comes a point in a great many older people’s lives when even a rise in the cost of electricity causes panic.”

While for many New Zealanders the spiralling cost of petrol is annoying and frustrating, for older people on low, fixed incomes, it could mean they are completely housebound – in a mortgage free house.

“It doesn’t really make sense when they have this asset that they can’t enjoy the retirement they have worked so hard towards,” Mr Klap says.

A survey Sentinel recently undertook with people who have taken advantage of home equity release showed that almost half used the money they received to undertake important maintenance on their homes.

“People want to stay in their own homes as long as they can; to be near neighbours, friends, family and facilities – and the government encourages them to do so. But if they can’t pay for the roof that is leaking, the plumbing that needs fixing and the electrics that need re-wiring, there’s not much chance of that. Releasing some equity in their home makes that possible.”

With the Sentinel Lifetime Loan, a person can borrow a percentage of their house value, the percentage depending on their age The loan principal and interest accrued is only repaid when the home is no longer required either because the owner dies or the house is sold for any other reason such as moving into a retirement home.

Borrowers must be over 60 years of age. Those aged 60 can borrow up to 10 percent of the value of their home and one percent more for each year through to the ceiling amount of 40 percent which those 90-plus are able to borrow. Sentinel says people must take independent legal advice before settling a loan, and the company advises people to take financial advice.

“And we also strongly recommend they discuss it with their family first. Independent research has shown us that people’s attitude to inheritance has changed. People don’t expect to inherit from their parents,” says Mr Klap who is also the father of three adult children who have children of their own.

“At the age of 78, the topic of inheritance sometimes comes up, and my children tell me and my wife Ria, they don’t expect an inheritance. They know we have worked hard all our lives to ensure they had a good education and the means to experience independent lives of their own,” he says.

“Now, they want us to enjoy our ‘retirement’, and use the money and assets we have to live the lifestyle we want.”

For Mr Klap, that means skiing, tramping, gardening and overseas adventures with Mrs Klap.

“I hope the current publicity surrounding home equity release continues so as many older New Zealanders and their families can decide just how they want to live based on knowledge of what is possible, not on what they think they have to accept.”

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