Heartland Bank offers retirees loan to buy into village without selling house first

By Susan Edmunds of RNZ

A new loan is offering to help people get into a retirement village without having to sell their own homes first – but there is a warning that it comes at a price.

Heartland Bank has launched "village access loans“ for retirees, which allow people to borrow a percentage of the price of a freehold property in the same area.

Chief executive Leanne Lazarus said many people would normally need to sell their homes to fund that payment, but that could be a challenge when house prices were low or it was hard to time the sale and move.

“Village access loans give people an alternative way to fund the move by allowing them to borrow against the equity in their home and postpone the sale of their property to a more convenient time,” Lazarus said.

People can borrow up to 50% of the value of their home to create a lump sum for the retirement village move.

The loan was for a maximum term of three years and no regular payments were required.

Heartland is offering retirees a loan to buy into a retirement village without having to sell their house first. Photo / 123rf

The interest rate is currently 9.59%, but varies.

Liz Koh, financial coach at Enrich Retirement, said the loan could be a good solution for people wanting to move to a village, particularly when the housing market was flat.

“We have seen a discrepancy between the price of houses and the price of licences to occupy, with the latter having at times outstripped the former,” Koh said.

“This has been a major barrier for people transitioning as they have watched the entry price for retirement villages soaring with the increase in building costs, while the value of their family home has either fallen or stayed flat while they are waiting to sell.”

Koh said it was often not easy to get bridging finance from a bank.

“Obviously the cost of obtaining the bridging finance will need to be looked at in relation to the benefits, noting that some of the benefits such as reduced stress and greater certainty will be intangible rather than monetary. As with any financial product, it will pay to get advice on whether this is the best option for your particular circumstances.”

– RNZ