Property law and borrowing by retired people

Loans to the elderly have been a sensitive area for banks for many years.

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).