September 29, 2024 • 41 mins
Martin Hawes joins Tim Beveridge on The Weekend Collective to discuss whether a reverse mortgage is ever viable, and the new concept of a reversion mortgage.
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Speaker 1 (00:05):
You're listening to the Weekend Collective podcast from News Talks,
it'd be.
Speaker 2 (00:13):
Got news.
Speaker 3 (00:15):
I gotta pay so long, I'm gonna work.
Speaker 2 (00:18):
Arn't work every day. I got mouth, I got fee,
so I'm gonna make sean everybody is. I got big
Polly's built.
Speaker 3 (00:30):
Find my test day looking like a mouth. All the
little kids run around. I can hear this comach's crowd.
There's a full moon out to my card house. Says
it gonna leave me and Pa'll come home at fifty thousand.
Speaker 2 (00:46):
All then then well then on then oh man a man,
old man.
Speaker 3 (00:51):
A man.
Speaker 2 (00:53):
I had a very good afternoon. If you've just joined us,
this is the Weekend Collective, you're like, it's five o'clock,
just gone five o'clock. Anyway, I'd say that because of
course the show starts at three. We had Politics Central
Chris Pink talking about the reform in the whole building
consent process, followed by Shane Jones, who, among other things,
we're talking about the loss of the jobs at the
in Timaru and just the reasons behind that, as well
(01:16):
as just be a bit of quick catch up on
the change to the fishing limits as well. The previous
hour with Kent John's from Kent John's Health for the
Health Hub about Mental Health Week and now you can
catch those by the way, just go and look for
the podcast, look for the Weekend Collective on our Heart
radio or the news talk Cippy website. But right now
it is time for smart Money and my guest is
(01:39):
financial author of a truckload of books. Actually I think
it's nineteen. I kept forgetting I filed at Underway of Lots.
It's like Nevaretti Marner when we ever on the panel.
How many wards is it? Neva thirteen fourteen? How many
books is it?
Speaker 4 (01:51):
Martin Hawes It's twenty three?
Speaker 2 (01:53):
Oh, twenty three?
Speaker 4 (01:54):
Sorry, yeah, and the twenty fourth has gone into the publisher,
so when that's published it will be twenty four.
Speaker 2 (02:00):
Now I suggested a title for the last last time.
I think I have no idea what it was. But
have you got a working title for it yet?
Speaker 5 (02:07):
Well?
Speaker 4 (02:07):
Yeah, I think the final title is something like retirement. Ready.
You know, the book is about disruption of my life,
my own personal life, left Queenstown, moved to christ Church.
And when you have a disruption like that, you should
have a look at all the aspects of your finance,
and at the same time, I wanted to make sure
(02:29):
that I was ready for retirement. I don't necessarily think
I'm going to retire anytime soon, but you're only as
good as your last doctor's visit when you get to
a certain age. So I sort of thought I needed
to be retirement ready. So it's the steps I took
to be retirement ready and to get my finances in
good order.
Speaker 2 (02:49):
Has your perspective changed when you go and have it,
I don't know if you do this sort of yearly
or whatever check up with the doctors, Has your perspective
changed on those visits, like here we go, yes, give
me the bad news.
Speaker 4 (03:01):
Yeah, it really has really over the last fifteen years.
I used to get a blood test and sort of
basically forget that I'd had to think and never never
think about it again. Now I get a blood test
and I'm waiting for the GP to ring and tell
me the results of it. So I do. I do
(03:22):
think quite differently about my health then I did, say
a decade or so ago.
Speaker 2 (03:30):
Yeah, that is interesting. I mentioned the change here. Is
there anything particular that triggers it? Or is it just
say you have one little incident you think, oh, my goodness, me,
that's it.
Speaker 4 (03:39):
No, I think it's it really comes from friends and
family who I have seen get bad results. So I
always thought my results wan didn't They always come back
and as usual they say you're perfect. But there's no
reason that my blood tests would come back perfect. You know,
(03:59):
I'm of an age now where imperfections are arising, and
I guess I've just seen so much of of bad
test result, bad medical test results, and yeah, you know,
one day that'll be me.
Speaker 2 (04:17):
It's funny. It's a I mean the philosophical point of view.
I was chatting to a friend, you know, about the
bereavement and things like that, and it's like like there's
a big, long queue and when you're young and healthy,
you know, the queue for the you know, for the
wrapping things up, it's a long one. And it feels
(04:38):
there is a slight change when your parents die, and
so when my parents start, it's almost like, oh, right,
I've just moved to the front of the Q sort
of thing. I don't know what that means anyway. Look,
we're not going to focus much more on this, but
it's interesting because I mean, actually you're because your books,
you sort of you help people out with the titles
of your books, because they're generally fairly literal, aren't they.
(05:00):
You focus on what's the messages, and here we go,
it's retirement ready.
Speaker 4 (05:03):
Yes, yes, that's right, yeah, yep. And it needs to
be that. It needs to say what the book is about.
You know, that's probably marketing one on one, I should think.
Speaker 2 (05:13):
I guess, so, yeah, well, actually, because what we want
I wanted to talk about the for this hour to
kick it off, is reverse mortgages. I well, there's a
story about it where the Retirement Commissioner commission should I say,
has said some pensioners. It's talked about how much you
(05:35):
can boost your income by up to fifty percent. I'm
thinking that's probably looking at the lower end of the
scale in terms of boosting a low level of income.
And every time I see the notion of reverse mortgages,
I've always loathed the idea because it seems like one
of those things where you get to borrow a little
(05:56):
bit against the equity of your home, and over the
course of time while you're living on that, the bank
just gradually eats into the rest of it. And I
sort of think there's got to be a better way
of funding your retirement. Of course there are better ways,
but I mean they've got a better, be better late
resort because it seems like that is that is an
(06:17):
option of late late or last resort, isn't it?
Speaker 4 (06:21):
Yes, yes, it is in the this is it's really
it's really a thing for people who are asset rich
and cash poor. And people wins about that, but it's
actually a choice because if you are, if you own
a house and not a lot else, you can do
something about that. You can downsize the house, or you
can go into some form of home equity release of
(06:42):
wiser and now you'll be pleased to hear two forms.
There are other reverse mortgages, which is what you were
talking about, But there is now a new one called
wait trot home reversions not not a terribly sexy sort
of name. Now a full disclosure.
Speaker 2 (07:01):
Home what home?
Speaker 4 (07:02):
What home? Home home reversion?
Speaker 2 (07:06):
A home reversion.
Speaker 4 (07:08):
Yeah. Now, I'm a director and a small shareholder of
the company that has launched this new form of home
equity release. Okay, and it's not borrowing, but instead it's selling.
Over a ten year period, it's selling a small amount
(07:28):
of the house each year to make up over ten years?
Are you selling thirty five percent of your house? So
if you started at an age seventy, each year you
would sell three point five percent of your house and
you would get an amount of money for that, and
that would effectively provide an income for you for a decade.
(07:54):
So from perhaps age if you entered into this at
age seventy two, that would run till age eighty two
and then the income would stop and lifetime the company
of which I'm a director and the shareholder would own
thirty five percent of your house.
Speaker 2 (08:10):
Actually that who thought of that idea? Because common I'm
happy to dig into it as well. I know you've
and you've declared your interest in it. Is it it's
something you borrow from overseas?
Speaker 6 (08:24):
Is it?
Speaker 7 (08:24):
Or?
Speaker 4 (08:24):
Yeah? Yeah, very common in France and other parts of
Europe and a few other places.
Speaker 1 (08:31):
And the.
Speaker 4 (08:33):
The good thing about this is that there's a little
bit more certainty because the problem with a reverse mortgage
is that the interest rate a is quite high. I
think the current one for Heartland's reverse mortgage is ten
point ten point five. But also it varies over time,
(08:54):
so you can't calculate exactly what the cost of this
is going to be over let's say the next twenty years.
The one the home reversion one that lifetime income has
done only last for ten years. But it's working on
the assumption, and the assumption is supported by a lot
(09:14):
of studies and so forth, the assumption that as you
move into your eighties, your expenditure and retirement will naturally fall.
You will do less shopping, you'll do less or maybe
even no travel, and so forth, And all the studies
show that there is a retirement spending is a V
(09:39):
shape that it gradually drops off as you move through retirement.
It might go up a little bit, but again right
at the end of retirement, as you move into care
or something like that, but generally there's a fall and
expenditure in retirement.
Speaker 2 (09:57):
How so that's because I actually was about to the
other and I guess the broad heading. So I keep
on chopping myself off because my as moving too quickly.
But it's about late late retirement planning or last minute
retirement sort of strategies. Because what's it called again, the
reverse mortgage. I must say I don't like it, And
(10:20):
it wasn't because I didn't like it when my parents alive,
because I didn't think that would work, not that they
ended up doing that, but I don't like it either
from the sake of the fact that would eat into
my equity is for what I could pass onto my kids.
But the other thing is I just I've always thought
that just putting your one to the side, just for
a second, that one of the key if you are
(10:41):
I guess it depends on where you're living and what
the market is you're living in and what your options are.
But if you have, over the course of your life
ended up in a reasonably pleasant home, that's got quite
a value to it. I would have thought that the
first thing you'd do is, well, okay, my house is
worth a million and a half, maybe I can find
something for half a million bingo downsize.
Speaker 4 (11:02):
Yeah. The problem with that is it it's to take
get any capital out of downsizing unless you move locality,
and generally that's from a city. So a Queenstown person
moving to christ Church is probably going to free up
a capital. They'll buy much cheaper house than christ Us
(11:22):
than they ever would in Queenstown. Or if you were
living in Auckland and you move to I don't know,
somewhere in the central North Island or somewhere or maybe
up in Northland again, you probably free up capital. Now
that means you're moving away from family, and you're moving
away from friends, and you're moving away from your connections
and all those kinds of things. If you simply say,
am going to literally downsize the house and have a
(11:44):
smaller house, that is, go from say three bedrooms to
two bedrooms, or a house to stay in, yes, or
something like that, you might free up a bit a
house to an apartment. But if you're just going, you know,
standalone house of three bedrooms to a standalone house of
two bedrooms and the same locality, you're probably, after costs,
(12:06):
not going to free up an awful lot of capital.
So a lot of downsizing does involve people moving. I
think three or four years ago when my daughter was
looking at at properties and I was doing a bit
of looking at properties with her, there was something like
a third of people who were buying properties in christ
Church were from out of town. Some would be speculators
(12:29):
and investors, but quite a lot of them were people
who were downsizing to christ Church. And that means they're
leaving behind a network and friends and family and so forth.
So downsizing is not all that it's cracked up to be.
I used to think it was a sort of a
silver ballot, but you know, when I look at it
(12:52):
in reality and I look at the way people go
about it, I don't think it's a silver ballet at all.
Speaker 2 (12:57):
I guess if you're living in Victoria, Aven and you
decide to move maybe just to three or four streets,
the probably downsize quite successfully given the projects in that market.
Speaker 4 (13:09):
But I'm sure, I'm sure you're right.
Speaker 2 (13:13):
You clarify that when you moved from Queenstown to christ Church.
Probably wasn't really with the idea of releasing equity, I'm
guessing as a former as financial advisor and currently financial author.
Speaker 4 (13:26):
No, no, it wasn't. It wasn't about freeing up a
capital at all. It was about family and moving back
to being by the sea, which I know. I was
in the mountains and Queens and I love the mountains,
but I love the sea as well. So there were
quite a lot of polls to christ Church and I
never wanted to leave it in the first place. So
(13:48):
here I am.
Speaker 2 (13:49):
But what a good solid cantabrin you are, Martin. We
want to take your cause on this a late retirement
and look, I think, well, look I've been I'm not
as on money, but I've been hosting a money are
enough to get the sense there are a lot of
people who are heading towards the retirement who feel that
they are not prepared for it. So what is on
(14:11):
your mind when it comes to getting ready for retirement?
Would you consider a reverse mortgage or home reversion which
is something that Martin has just shared with us, which
we're going to dig into a little bit more after
this R E one hundred and eighty ten eighty text
nine two. It's coming up to twenty one past five
News Talk s B and welcome back. This is the
(14:47):
weekend collective. I'mton Beverage. This is smart Money. My guest
is Martin Haw's financial author twenty three books, soon to
be twenty four, and we're talking about late retirement options,
in particular the reverse mortgage. But as Martin has mentioned,
the idea of what's called home reversion, and he's declared
he's actually a director and a small shareholder and a
(15:08):
company that is starting this new idea, and it basically,
instead of borrowing money where the bank gradually eats into
your equity, but you borrow a chunk of money here,
you actually sell a part of your house over a
ten year period. I've got to be nice and circumspect
about this, because when I hear a new idea, I
was get excited about it. But Martin it, I must say,
(15:30):
I'm on the face of it, it sounds like a
bloody good idea.
Speaker 4 (15:34):
Yeah you are. Of course, they're still giving up equity,
so yeah, yes, but you're getting.
Speaker 2 (15:40):
Paid for it's not getting eaten into. And if you
still own seventy percent of the house, if your house
goes up in value, it's still worth seventy percent of
your house, I mean, and I guess so will your
home be with the reverse mortgages.
Speaker 4 (15:56):
You can't. You can't have your cake and eat it too.
What you trading. What you're doing is trading thirty five
percent of your house or lifestyle.
Speaker 2 (16:06):
Yeah, which I'd.
Speaker 4 (16:07):
Argue isn't valuable. And you know, a lot of a
lot of people they're getting their ends super and that
might be thirty five forty thousand dollars a year, depending
on texts and so forth, and they are almost that,
you know, it depends on the size of the house
and so forth. The value of the house, but they
can almost double that and that gives a significantly better lifestyle.
Speaker 2 (16:32):
Actually, just before we go, we actually I'm going to
let some of our callers ask questions because there's a
lot of texts and we're going to have callers who
want to find out a bit more about this. But
I just wanted to touch on one little thing to
get your thoughts about it. It's more just a decision
around retirement that you were talking about. How as you
get older, there becomes an age where you do just
spend less because you're doing less and you're less active,
et cetera. And I my rule of thumb would be
(16:53):
that if I am still living the sort of life
where I'm going to be requiring the same sort of
spending as pre sixty five, I would imagine if I
still felt that I was going to be that busy
and spending that much, I probably still want to be
kept working.
Speaker 4 (17:07):
To be honest, Yeah, yeah, that's right. What is it?
Forty eight percent of people aged sixty five to seventy
are still working. And I think you're right. I think
if you're active and able to work, then you could
very well choose to there's a small ish number of
wealthy people who can afford to fund a very good lifestyle,
(17:31):
A lot of them. You know, I had a lot
of those kind of kinds of people as clients when
they used to be an advisor. But yeah, you know
I have I think if this new book has a
I think the chap brom work is called something like
in praise of work, because work does have a fair
bit going for it, not not just the money, but
social engagement and so forth.
Speaker 2 (17:51):
Social engagement and just keeping active and all that sort
of thing, so long as the work itself isn't destroying
you if you're doing obviously, you don't want to be
working in a coal mine.
Speaker 4 (18:01):
Or up on the roof banging on. That's the one, yeah,
n Or something like something like you need to be
in a job like you and me, we're sitting on our.
Speaker 2 (18:12):
Butts talking good on it. Well I am you? Hey, thanks? Right,
let's take some calls. Paul, Hello, how's it going.
Speaker 5 (18:20):
I just want to ask him a a question. Is
it like reverse morgage? You know, like someone bars the
money over ten years and five years they have to
sell their house to go into a rest home. You know,
does have money? It does whatever's owe on the house
they take, do they take it out or can they
(18:40):
transfer transferred onto the other property day buy because the
only thing I don't like about reverse mortgage is is
so many people that do it and they go into
wrist home. They can't afford to buy a house because
the money's gone.
Speaker 4 (18:58):
Yes, probably there'd be certainly no guarantee of that, and
it would be unlikely because you know, going into a
rest home we being lifetime and come. And I don't
think the reverse mortgage people either, would you know, are
able to lend or buy a little bit of a
(19:18):
of a rest time So you'd have to use the
sixteen in our case, you'd have to use whatever was
left of your equity to buy the rest time? You
not And you might do that, but you might not either.
Speaker 5 (19:33):
Yeah, can you ever do a thing like finances would beat?
You know, we'd invest money be beat because iron about
iron te teen ten thousand dollars before to six weeks
my rentals and just finding somewhere to env invest rest
of money.
Speaker 4 (19:53):
I don't do that personally, and I didn't even do
that when I was a financial advisor. All I did
was give advice to people and help them find somebody
who would be the money for them, of which all,
there are plenty of people around who will do that
for you, and do it quite compotantly.
Speaker 2 (20:12):
It doesn't sound like I've put he's earning that money
in that period of time, and he needs to worry
about the reverse mortgage, that's for sure. But I'm curious questions. Yeah, thanks,
thanks Paul. Let's take another question or call Bruce solo
game all right?
Speaker 4 (20:27):
All right, hi.
Speaker 7 (20:29):
Martin.
Speaker 8 (20:29):
Hey, our situation is that we have a freehold house
and also a freehold commercial building. Now, we took early
retirement a few years ago and we're sort of starting
run out of a bit of bread. Now, what do
one knows if we would have put a reverse mortgage
or a home equity release mortgage on our house and
we sold their commercial property sat in five years time?
(20:50):
Are we able to pay that mortgage off without any penalties?
Speaker 5 (20:55):
Oh?
Speaker 4 (20:55):
What a good question. I'm not sure. I'm not sure
the reverse mortgage would you whether you would have that right,
but you could probably negotiate that. I don't think you'd
be able to do it with lifetime with the with
the home reversion one because you've actually sold say thirty
(21:16):
five percent of the house. You could argue, can we
just buy it back? Well, maybe on a one off
kind of deal, but you'd be an outlier. I'd have
to say brucently. You know, there wouldn't be many people
in that sort of situation.
Speaker 8 (21:30):
Yeah, because the problem we have is that no bank
will need ue any money because we don't really have
an income.
Speaker 4 (21:36):
Yes, yeah, and what about the commercial property that should
be generating an income.
Speaker 8 (21:41):
Yeah, but that gives us enough to live on, I see,
don't money to travel or anything.
Speaker 4 (21:47):
Yeah. Yeah.
Speaker 8 (21:49):
So that's why I sort of thought, until we get
the pension and they maybe say for another two or
three years, if we had a reverse like a Heartland
Bent type mortgage, I think that once we sell the
commercial property to realize some cash that I was hoping,
we'd be able to pay that often and get back
to being free.
Speaker 4 (22:09):
It would be worth going, and it'd be worth going
and talking to them. I mean, I know some of
the people there, they're very good people. They would you know,
they may not be able to do that. Their rules
and so forth in the way they've got their book
structured may not allow them. But I think they'd look
at it for you maybe.
Speaker 2 (22:29):
Actually just quickly proceeds that once you do start getting
the pension, is that your retirement, is that your travel money?
Speaker 4 (22:34):
Is it?
Speaker 8 (22:36):
Well, it will be how it would be helpful, but
it certainly wouldn't let us do any big trips for
say to a few years till we built up a
bit of a bit of cash behind us again. But yeah,
unless there's another suggestion that Martin can make that we
could do well.
Speaker 4 (22:52):
My suggestion actually would be to sell the commercial property
now and have that either invest the money yourself or
more likely have somebody invest it for you, and then
have a draw down rate, so a set amount that
you're going to take each month, which means that you
will run the capital down and be able to spend
(23:16):
it on a monthly basis.
Speaker 8 (23:18):
You mean spend the kids inheritance.
Speaker 2 (23:20):
Now, that's the one.
Speaker 4 (23:21):
Yep, absolutely that it.
Speaker 8 (23:24):
Has occurred to me and certainly is probably one of
the better options. I just thought I'd run a past
you see.
Speaker 4 (23:34):
Yeah, well no, no, I wouldn't ask the they might
say no, I'd have a chance a chat to Heartland.
SBS Bank is the other one who operates who offers
these things as well, So have a chat to s
(23:54):
BS s b S bank.
Speaker 8 (24:00):
Okay, thank you very much for your health.
Speaker 2 (24:01):
Thanks okay, not specific financial advice, by the way, just
have a yat to someone. So the first Morge just
remind me so that basically you borrow money against your
house and they give you a mortgage and they don't
expect you and so instead of repayments, it just starts
to clock up against your equities. So you can still
sell your house, but then you'll have to repay whatever's owing.
Speaker 4 (24:20):
Yes, including the interest, so the interest compounds. Interests have
not paid it. Just the amount of the loan grows
over time, and you'd hope that the house would grow
on value as well, or the kids would hope that
the house would grow in value as well, and it
may do, but of course it hasn't. In the last
couple of years, they've dropped them value on the whole.
Speaker 2 (24:43):
So what's the advantage of the home reversion that you're
outlying so you're selling Just to sum it up again,
you're selling three and a half percent of the house
per year for ten years. What's the advantage over the
mortgage you.
Speaker 4 (24:58):
This probably there's lots of properties in this, but it's
probably more certain than a reverse mortgage, because with a
reverse mortgage you're subject to the vagaries of interest rate
ups and interest rate downs. Now, a reverse mortgages interest
rate is always higher than the common garden home loan
(25:22):
interest rate, and that's because they're not getting the cash
now that wing to wait to get it. But if
interest rates went through the roofs, that would that would
mean that the loan would compound even faster and become
even greater, you know. So there's a bit more uncertainty there,
(25:44):
whereas with the with the home reversion, you know that
you're going to end up having sold thirty five percent
of the house, and you know therefore that you have
sixty five percent of the house's equity. You don't know
what that's going to be worse because you don't don't
know what house prices are going to do in the meantime.
Speaker 2 (26:03):
So you set the price at that period, you sell
the first three and a half percent. I've got a
house worth a million bucks, then you are getting three
and a half percent of.
Speaker 4 (26:15):
A million bucks less fees, less fees, and you get
that as an income. You don't get it as a
lump sum.
Speaker 2 (26:22):
So if your house is doubled in value. In ten years,
you're still selling three and a half for the for
the old price.
Speaker 4 (26:29):
No selling, No, each each year the house is valued.
Speaker 2 (26:33):
Oh really, Oh okay, Well that's that's that's that was
That's caught me by surprise because I thought that one
of the values was that you guys were buying a steak.
But of course the three and a half percent that
the home Reversion company has bought that is worth more
because your own a part of the house. And that's okay.
So you're not locking people in it. You're not locking
(26:55):
people in it.
Speaker 4 (26:55):
Today's prices no so, and tim don't forget, and people,
especially my age, probably your age as well, think that
home prices are a one way street as they always
go up. In the last two or three years, they've
actually gone down quite significantly, not in all markets, spun
in some markets.
Speaker 2 (27:16):
Yeah, that's worth remembering. Right, Let's take some more calls
on this and I'll go through some of that. There's
some good questions. Oh, by the way, I'm just going
to deal with this one before we go to Michael.
It's usually the aggressive questions come with a bit of
an insult, says how thick are you all these mortgage
schemes is to benefit the schemers. Well, everyone's in business,
aren't they, Martin. I mean that's the point. I mean,
(27:38):
you're not doing a lot of charity.
Speaker 4 (27:40):
No lifetime incomers, trying to make a proper you did, right,
I'd be unapologetic about that. You know, you obviously have
to and looking at these you have to look at
the fees, so you know.
Speaker 2 (27:54):
No, you don't have to respond to that. I just
want to. I thought i'd just read that one. Of course,
everyone's in business. I mean I turn up work and
I enjoy doing it, but I do like to get
paid for it too. Okay, right, let's care on where
we're up to Michael.
Speaker 7 (28:06):
Hello, Oh, good afternoon to Mike. I didn't hear the
beginning of Martin's interview, et cetera. So this might be
a stupid question. But who do you sell that thirty
five percent too? Is it relatives? Is it anybody?
Speaker 2 (28:22):
Is it to a company?
Speaker 4 (28:24):
And it's markin carry on? Yes, yes to lifetime income.
You sell it to that. Now we may package that fact.
We will package it up and sell it on. Sell
that and all the other loans that we are all
the other bits of equity we've got to investors who
want to invest in residential property. But you're selling in
(28:46):
the first and instance, you're selling that little bit of
equity repeatedly for a decade. You're selling it to lifetime
income to the company.
Speaker 7 (28:57):
Yes, but my question, yep, my question is I was
just thinking that if that was so, who is it
the company that owns it, or does somebody else buy
into my house or your house?
Speaker 4 (29:13):
We may we will buy your we will buy thirty
five percent.
Speaker 7 (29:19):
Yep.
Speaker 4 (29:19):
We we may package that up and we may sell that.
In fact, we will sell it on to other investors,
because we don't we don't want to.
Speaker 2 (29:27):
So what what I think, what what Michael means is
whose interest is lodged on the title as A as A.
Speaker 7 (29:35):
Because because my question from then on is I used
to own an ex financial advisor and in minor way,
but there are problems, say the next people have a
marriage breakup, or there somebody does something you know, or
they're just good bananas and ruin your house, et ceter.
Speaker 2 (29:58):
Okay, so it's about the it's about who Obviously you
would organize a right to occupy I'm guessing, but yeah,
who's actually on the title.
Speaker 4 (30:04):
You can answer that now, mat Yeah, yeah, both both parties,
both Lifetime and yourself would be on the title and
the percentages of ownership. And you have the right to
stay in the house, providing you you follow all the
rules and look after it and such like you have to.
You have the right to stay in the house until
(30:27):
it until it's sold.
Speaker 2 (30:30):
Yeah. So if you sell the interest on Martin, does
someone else end up lodged in the title as well?
Speaker 4 (30:35):
Yeah? Right, yes, that's the problem.
Speaker 2 (30:39):
Well, it depends on what under what terms. They can't
just yeah, I mean I guess there would be a
caveat on on your on life, on your ownership, wouldn't
it Martin in your company.
Speaker 4 (30:49):
It's a very complicated legal agreement, and I'm not yeah
it will be, Yeah, it will be. This is something
and the same with reverse mortgage. You have to get
good legal advice on.
Speaker 7 (31:05):
When you've got a reverse mortgage, you still own the
whole house.
Speaker 4 (31:08):
Yes, that's right, all be.
Speaker 7 (31:10):
A part of the screen. Whereas this other way. Just
for sake of argument, say there is a marriage break
up and they fight about that thirty five percent of
your house, I don't you know that's that's a rare
trauma for the I'm the older, you get trauma's get magnified.
Speaker 2 (31:28):
You're assuming that someone else's problems are going to mean
that they can argue whether to sell your house. I'm
guessing the legal agreement is that only you can sell
your house.
Speaker 7 (31:38):
I've sold it. I've sold it to these people. They've
given somebody else, another couple and they're happy ever after.
Speaker 2 (31:45):
No, they're not might divorce, yeah, but they don't have
the right to sell your house. That will be part
of the agreement. I'm thinking is that you're not suddenly
buying into a relationship, would be my guess. Of course,
you're not going to do a deal with yourself just
to someone haphazardly or three. I'm probably answering your questions
for you, but I think that Michael was probably at
(32:06):
one on one equals ten.
Speaker 4 (32:11):
Yes. Yeah, the original homeowner who sold down thirty five
percent of their home, they can stay in the house
for as long as they like. When they sell up
for whatever reason, whether it's a marriage breakup or whether
they downsize or whether they go into a rest home.
When they sell up, the proceeds will be after costs
(32:33):
will be divided at whatever percentage. It is probably sixty
five to thirty.
Speaker 2 (32:38):
Five because I think that what Michael was assuming was
what if another couple ended up owning, you know, the homeowner. Yeah,
and it's not subject to that sort of gaos. Yeah,
actually just out of so, how do you once somebody
with a home reversion? Actually, I tell you what. Sorry,
I'm late with a break. We'll come back. I've got
a good question for in more calls to get onto,
(32:58):
so we'll be back in just the tickets eighteen minutes
to six?
Speaker 1 (33:05):
Do you nay go?
Speaker 4 (33:07):
Did machine us?
Speaker 1 (33:09):
And we're not.
Speaker 2 (33:12):
Welcome back to the show. This is Smart Money. I'm
Tin Beverage. My guest is Martin Haugh's author of twenty
three going on twenty four financial books on financial advice,
and we're talking about late minute, last minute sort of
retirement plans. Quick question Martin on the home home reversion
idea where people sell three and a half percent for
(33:33):
ten years of their property. Is there an age qualification
for this?
Speaker 4 (33:37):
Yes, yeah, there is. You've got to be at least
seventy ah and there will be an upper age limit.
I think as well, but I can't recall what that
is off off hand.
Speaker 2 (33:48):
Because I could imagine the young people go and tell
you what, I'm going to buy a house and these
guys are going to own thirty five percent. That's great.
I don't have to pay seventy percent of the house
or whatever.
Speaker 4 (33:57):
You see, it's a ten year deal. Also, so yes,
we're assuming that people have about age seventy peak expenditure.
That's when they want to go to you know, through
their seventies that they're going to spend their money. I'm
in my seventies. I'm going to Europe to go rock
climbing every year, and I'm doing this and I'm doing that.
(34:19):
And so it's that when it's that time that expenditure
is high, and that's when people need the extra income.
Speaker 2 (34:27):
Do you what about the home reversion company? Do they
given that rates are a property tax, do they who
pays the rates and insurance the occupy pays the costs
and looks after the property. Yep? Good only Okay, now right,
let's that's as you say, if you're interested in this
(34:48):
sort of thing, you need to get legal advice. And
Martin certainly not yes advocation for his own companies, just
mentioning that this is another alternative. Let's take another call
a Richard.
Speaker 6 (34:57):
Hello, Hi there, I'm seventy six years old, and I
have a house or properly, it's worth about one point
one million, but it has a four hundred and fifty
thousand dollars mortgage on it due to a marital chef settlement.
(35:20):
And I've also got about four hundred dollars in Kiwi savor,
which is mine. So the questions I have are, does
it is the Is there a requirement of your scheme
that that the mortgages is mortgage free?
Speaker 4 (35:41):
Yes? Yes, the property would need to be mortgage free,
so you'd need to find a way of paying that
in full and have the I don't have no mortgage
on the title, right.
Speaker 5 (35:55):
So it wouldn't.
Speaker 6 (35:56):
It's a situation where if the house is sold, you'd
get thirty five percent. The bank would take fair amount.
I mean, I'm you know, I'm I don't have any
children or anything like that, so and you know I
have the Oscar Wild philosophy, it's better to die penless
(36:17):
and knowing money.
Speaker 4 (36:19):
To you, Taylor, Yeah no, you'd have to have to
clear the clear them more good Richard.
Speaker 2 (36:29):
Yeah, okay, So let me work through some of the
text questions here, somebody's just saying, also, it's it's always
worth remembering the power of compound interest, just as a
general lesson in life. Einstein said compound interest was the
eighth wonder of the world. And then think of an
interest rate of ten percent working against you when it
comes to the reverse mortgages. Yeah, I must say reverse
(36:51):
mortgages to me sort of the devil. But personal opinion
only hello again, says this text. It must have sent
an earlier one. Can I sell the house anytime I want?
And am I?
Speaker 4 (37:04):
Yes?
Speaker 2 (37:04):
Okay, you can? Yes? And does the thirty five percent
owner just get whatever the market value is of its
shares obviously less? Yes, whatever, phase, etcetera. No additional pendally.
Speaker 4 (37:15):
Yep, So we take we take the ownership rusk.
Speaker 2 (37:18):
Are you tied into selling three and a half percent
ten times?
Speaker 4 (37:24):
No, I'm pretty sure you could stop that, Okay, if
you want to know, I've had the income. I don't
need income now, I'm I'm beyond travel. I'm not spending
as much so I thought I would. I don't you know.
I'm pretty sure you can stop.
Speaker 2 (37:40):
But because death would be an out, I would that would.
Speaker 4 (37:44):
Wrap it up most most certainly is and moving out
for whatever reason.
Speaker 2 (37:49):
Yeah, I mean, certainly speaking, death is generally or release
for all your obligations.
Speaker 4 (37:53):
That's right.
Speaker 2 (37:54):
Put a black human there anyway. Yes, we'll be back
in just to take News Talks B eight hundred eighty,
ten eighty. We have time to squeeze another call while
I've looked at some more of the correspondents. Ten to six. Yes,
News Talk said, be with Martin Hawser. Martin, We're going
to do some quick Let's do some quick fire texts
on this whole thing and see what we can get
through in the next three minutes. Martin, which of your
(38:14):
books would you recommend for someone getting close to retirement?
Speaker 4 (38:17):
Thanks Cracking Open the Net. It's my last book. Came
out last year or the year before.
Speaker 2 (38:24):
Yep, excellent Martin. Have you done any comparisons between going
to a retirement village and downsizing for the older person
regarding freeing up cash.
Speaker 4 (38:35):
No, I haven't. But it depends what you're going to
do with the cash when you've downsize, assuming you're going
to spend that, I doubt that there would be a
lot or not, to be honest, now, it depends also
on how long you stay in the retirement village, because
if you stay there, like my mother did the twenty
(38:55):
odd years, her retirement unit was worth an awful lot
less than any unit that she could buy in the
market twenty years later.
Speaker 2 (39:07):
Okay, right, regarding the reversion home reversion, if you decide
to travel and put a tenant in your property, is
that complicate things? That's from Sue.
Speaker 4 (39:17):
Again, looks something I'm really sorry.
Speaker 2 (39:19):
So give the lifetime Yeah, actually we'll give you might
as well give the websites so people go and check
out the information. Where would they go?
Speaker 4 (39:26):
I think it's just lifetime and lifetime income dot co
dot NZ.
Speaker 2 (39:32):
Yeah, and probably if you googled home reversion that may
come up with a New Zealand as well. Okay, that's
another question. Okay, somebody's just as what the contactors? So
we've done that one. I like the concept who descermines
the value of the property as you go in three
and a half.
Speaker 4 (39:50):
There is a process for that, which is obviously quite robust.
You have to in launching any any product like this,
financial product like this, it has to be consumer friendly.
You can't have there the disadvantage the consumers. So the
(40:10):
valuers will have to be involved, but there is also
a process of the disagreement on valuation.
Speaker 2 (40:15):
Yeah, okay, hey, look, I think that it's been a
great conversation because I think, for one, there's an alternative
that's been presented, because I think a lot of people think,
oh God, if the only thing I've got left is
a reverse mortgage. But there are other options. There's the
downsizing option, which you can always look into. You can
get legal advice on the home reversion, or you can
decide you're going to go with the But at least
there are options, so we can discuss other options another time,
(40:39):
can't we, Martin? Yes, indeed, yes, okay, excellent, Hey Martin,
and mountain climbing in Europe and you're doing well?
Speaker 4 (40:48):
Do you go? Still?
Speaker 2 (40:49):
You do use rapes, don't you? You're not free solo?
Speaker 4 (40:51):
Oh yeah, no, no, I'm not free soloing. I want
to live a lot longer yet that.
Speaker 2 (40:57):
Would be what's called a late life crisis free solo
up El Capitan. You've seen that.
Speaker 4 (41:05):
I have absolutely makes the hears on the back.
Speaker 2 (41:11):
Anyway, Hey, thanks so much, And that's Martin Hawes.
Speaker 5 (41:14):
There we go.
Speaker 2 (41:14):
That rout's smart money. Thank you mate, well, thanks my
producer Tyre Robert's great job.
Speaker 1 (41:19):
Tyra.
Speaker 2 (41:19):
We'll look forward to I'm back on at midday tomorrow
and for the rest of the week as well, so
we'll catch you basically every afternoon for the next seven days.
We'll catch you soon, have a great evening.
Speaker 1 (41:31):
For more from the Weekend Collective, listen live to News
Talk zed Be weekends from three pm, or follow the
podcast on iHeartRadio.
You're listening to the Weekend Collective podcast from News Talks,
it'd be.
Speaker 2 (00:13):
Got news.
Speaker 3 (00:15):
I gotta pay so long, I'm gonna work.
Speaker 2 (00:18):
Arn't work every day. I got mouth, I got fee,
so I'm gonna make sean everybody is. I got big
Polly's built.
Speaker 3 (00:30):
Find my test day looking like a mouth. All the
little kids run around. I can hear this comach's crowd.
There's a full moon out to my card house. Says
it gonna leave me and Pa'll come home at fifty thousand.
Speaker 2 (00:46):
All then then well then on then oh man a man,
old man.
Speaker 3 (00:51):
A man.
Speaker 2 (00:53):
I had a very good afternoon. If you've just joined us,
this is the Weekend Collective, you're like, it's five o'clock,
just gone five o'clock. Anyway, I'd say that because of
course the show starts at three. We had Politics Central
Chris Pink talking about the reform in the whole building
consent process, followed by Shane Jones, who, among other things,
we're talking about the loss of the jobs at the
in Timaru and just the reasons behind that, as well
(01:16):
as just be a bit of quick catch up on
the change to the fishing limits as well. The previous
hour with Kent John's from Kent John's Health for the
Health Hub about Mental Health Week and now you can
catch those by the way, just go and look for
the podcast, look for the Weekend Collective on our Heart
radio or the news talk Cippy website. But right now
it is time for smart Money and my guest is
(01:39):
financial author of a truckload of books. Actually I think
it's nineteen. I kept forgetting I filed at Underway of Lots.
It's like Nevaretti Marner when we ever on the panel.
How many wards is it? Neva thirteen fourteen? How many
books is it?
Speaker 4 (01:51):
Martin Hawes It's twenty three?
Speaker 2 (01:53):
Oh, twenty three?
Speaker 4 (01:54):
Sorry, yeah, and the twenty fourth has gone into the publisher,
so when that's published it will be twenty four.
Speaker 2 (02:00):
Now I suggested a title for the last last time.
I think I have no idea what it was. But
have you got a working title for it yet?
Speaker 5 (02:07):
Well?
Speaker 4 (02:07):
Yeah, I think the final title is something like retirement. Ready.
You know, the book is about disruption of my life,
my own personal life, left Queenstown, moved to christ Church.
And when you have a disruption like that, you should
have a look at all the aspects of your finance,
and at the same time, I wanted to make sure
(02:29):
that I was ready for retirement. I don't necessarily think
I'm going to retire anytime soon, but you're only as
good as your last doctor's visit when you get to
a certain age. So I sort of thought I needed
to be retirement ready. So it's the steps I took
to be retirement ready and to get my finances in
good order.
Speaker 2 (02:49):
Has your perspective changed when you go and have it,
I don't know if you do this sort of yearly
or whatever check up with the doctors, Has your perspective
changed on those visits, like here we go, yes, give
me the bad news.
Speaker 4 (03:01):
Yeah, it really has really over the last fifteen years.
I used to get a blood test and sort of
basically forget that I'd had to think and never never
think about it again. Now I get a blood test
and I'm waiting for the GP to ring and tell
me the results of it. So I do. I do
(03:22):
think quite differently about my health then I did, say
a decade or so ago.
Speaker 2 (03:30):
Yeah, that is interesting. I mentioned the change here. Is
there anything particular that triggers it? Or is it just
say you have one little incident you think, oh, my goodness, me,
that's it.
Speaker 4 (03:39):
No, I think it's it really comes from friends and
family who I have seen get bad results. So I
always thought my results wan didn't They always come back
and as usual they say you're perfect. But there's no
reason that my blood tests would come back perfect. You know,
(03:59):
I'm of an age now where imperfections are arising, and
I guess I've just seen so much of of bad
test result, bad medical test results, and yeah, you know,
one day that'll be me.
Speaker 2 (04:17):
It's funny. It's a I mean the philosophical point of view.
I was chatting to a friend, you know, about the
bereavement and things like that, and it's like like there's
a big, long queue and when you're young and healthy,
you know, the queue for the you know, for the
wrapping things up, it's a long one. And it feels
(04:38):
there is a slight change when your parents die, and
so when my parents start, it's almost like, oh, right,
I've just moved to the front of the Q sort
of thing. I don't know what that means anyway. Look,
we're not going to focus much more on this, but
it's interesting because I mean, actually you're because your books,
you sort of you help people out with the titles
of your books, because they're generally fairly literal, aren't they.
(05:00):
You focus on what's the messages, and here we go,
it's retirement ready.
Speaker 4 (05:03):
Yes, yes, that's right, yeah, yep. And it needs to
be that. It needs to say what the book is about.
You know, that's probably marketing one on one, I should think.
Speaker 2 (05:13):
I guess, so, yeah, well, actually, because what we want
I wanted to talk about the for this hour to
kick it off, is reverse mortgages. I well, there's a
story about it where the Retirement Commissioner commission should I say,
has said some pensioners. It's talked about how much you
(05:35):
can boost your income by up to fifty percent. I'm
thinking that's probably looking at the lower end of the
scale in terms of boosting a low level of income.
And every time I see the notion of reverse mortgages,
I've always loathed the idea because it seems like one
of those things where you get to borrow a little
(05:56):
bit against the equity of your home, and over the
course of time while you're living on that, the bank
just gradually eats into the rest of it. And I
sort of think there's got to be a better way
of funding your retirement. Of course there are better ways,
but I mean they've got a better, be better late
resort because it seems like that is that is an
(06:17):
option of late late or last resort, isn't it?
Speaker 4 (06:21):
Yes, yes, it is in the this is it's really
it's really a thing for people who are asset rich
and cash poor. And people wins about that, but it's
actually a choice because if you are, if you own
a house and not a lot else, you can do
something about that. You can downsize the house, or you
can go into some form of home equity release of
(06:42):
wiser and now you'll be pleased to hear two forms.
There are other reverse mortgages, which is what you were
talking about, But there is now a new one called
wait trot home reversions not not a terribly sexy sort
of name. Now a full disclosure.
Speaker 2 (07:01):
Home what home?
Speaker 4 (07:02):
What home? Home home reversion?
Speaker 2 (07:06):
A home reversion.
Speaker 4 (07:08):
Yeah. Now, I'm a director and a small shareholder of
the company that has launched this new form of home
equity release. Okay, and it's not borrowing, but instead it's selling.
Over a ten year period, it's selling a small amount
(07:28):
of the house each year to make up over ten years?
Are you selling thirty five percent of your house? So
if you started at an age seventy, each year you
would sell three point five percent of your house and
you would get an amount of money for that, and
that would effectively provide an income for you for a decade.
(07:54):
So from perhaps age if you entered into this at
age seventy two, that would run till age eighty two
and then the income would stop and lifetime the company
of which I'm a director and the shareholder would own
thirty five percent of your house.
Speaker 2 (08:10):
Actually that who thought of that idea? Because common I'm
happy to dig into it as well. I know you've
and you've declared your interest in it. Is it it's
something you borrow from overseas?
Speaker 6 (08:24):
Is it?
Speaker 7 (08:24):
Or?
Speaker 4 (08:24):
Yeah? Yeah, very common in France and other parts of
Europe and a few other places.
Speaker 1 (08:31):
And the.
Speaker 4 (08:33):
The good thing about this is that there's a little
bit more certainty because the problem with a reverse mortgage
is that the interest rate a is quite high. I
think the current one for Heartland's reverse mortgage is ten
point ten point five. But also it varies over time,
(08:54):
so you can't calculate exactly what the cost of this
is going to be over let's say the next twenty years.
The one the home reversion one that lifetime income has
done only last for ten years. But it's working on
the assumption, and the assumption is supported by a lot
(09:14):
of studies and so forth, the assumption that as you
move into your eighties, your expenditure and retirement will naturally fall.
You will do less shopping, you'll do less or maybe
even no travel, and so forth, And all the studies
show that there is a retirement spending is a V
(09:39):
shape that it gradually drops off as you move through retirement.
It might go up a little bit, but again right
at the end of retirement, as you move into care
or something like that, but generally there's a fall and
expenditure in retirement.
Speaker 2 (09:57):
How so that's because I actually was about to the
other and I guess the broad heading. So I keep
on chopping myself off because my as moving too quickly.
But it's about late late retirement planning or last minute
retirement sort of strategies. Because what's it called again, the
reverse mortgage. I must say I don't like it, And
(10:20):
it wasn't because I didn't like it when my parents alive,
because I didn't think that would work, not that they
ended up doing that, but I don't like it either
from the sake of the fact that would eat into
my equity is for what I could pass onto my kids.
But the other thing is I just I've always thought
that just putting your one to the side, just for
a second, that one of the key if you are
(10:41):
I guess it depends on where you're living and what
the market is you're living in and what your options are.
But if you have, over the course of your life
ended up in a reasonably pleasant home, that's got quite
a value to it. I would have thought that the
first thing you'd do is, well, okay, my house is
worth a million and a half, maybe I can find
something for half a million bingo downsize.
Speaker 4 (11:02):
Yeah. The problem with that is it it's to take
get any capital out of downsizing unless you move locality,
and generally that's from a city. So a Queenstown person
moving to christ Church is probably going to free up
a capital. They'll buy much cheaper house than christ Us
(11:22):
than they ever would in Queenstown. Or if you were
living in Auckland and you move to I don't know,
somewhere in the central North Island or somewhere or maybe
up in Northland again, you probably free up capital. Now
that means you're moving away from family, and you're moving
away from friends, and you're moving away from your connections
and all those kinds of things. If you simply say,
am going to literally downsize the house and have a
(11:44):
smaller house, that is, go from say three bedrooms to
two bedrooms, or a house to stay in, yes, or
something like that, you might free up a bit a
house to an apartment. But if you're just going, you know,
standalone house of three bedrooms to a standalone house of
two bedrooms and the same locality, you're probably, after costs,
(12:06):
not going to free up an awful lot of capital.
So a lot of downsizing does involve people moving. I
think three or four years ago when my daughter was
looking at at properties and I was doing a bit
of looking at properties with her, there was something like
a third of people who were buying properties in christ
Church were from out of town. Some would be speculators
(12:29):
and investors, but quite a lot of them were people
who were downsizing to christ Church. And that means they're
leaving behind a network and friends and family and so forth.
So downsizing is not all that it's cracked up to be.
I used to think it was a sort of a
silver ballot, but you know, when I look at it
(12:52):
in reality and I look at the way people go
about it, I don't think it's a silver ballet at all.
Speaker 2 (12:57):
I guess if you're living in Victoria, Aven and you
decide to move maybe just to three or four streets,
the probably downsize quite successfully given the projects in that market.
Speaker 4 (13:09):
But I'm sure, I'm sure you're right.
Speaker 2 (13:13):
You clarify that when you moved from Queenstown to christ Church.
Probably wasn't really with the idea of releasing equity, I'm
guessing as a former as financial advisor and currently financial author.
Speaker 4 (13:26):
No, no, it wasn't. It wasn't about freeing up a
capital at all. It was about family and moving back
to being by the sea, which I know. I was
in the mountains and Queens and I love the mountains,
but I love the sea as well. So there were
quite a lot of polls to christ Church and I
never wanted to leave it in the first place. So
(13:48):
here I am.
Speaker 2 (13:49):
But what a good solid cantabrin you are, Martin. We
want to take your cause on this a late retirement
and look, I think, well, look I've been I'm not
as on money, but I've been hosting a money are
enough to get the sense there are a lot of
people who are heading towards the retirement who feel that
they are not prepared for it. So what is on
(14:11):
your mind when it comes to getting ready for retirement?
Would you consider a reverse mortgage or home reversion which
is something that Martin has just shared with us, which
we're going to dig into a little bit more after
this R E one hundred and eighty ten eighty text
nine two. It's coming up to twenty one past five
News Talk s B and welcome back. This is the
(14:47):
weekend collective. I'mton Beverage. This is smart Money. My guest
is Martin Haw's financial author twenty three books, soon to
be twenty four, and we're talking about late retirement options,
in particular the reverse mortgage. But as Martin has mentioned,
the idea of what's called home reversion, and he's declared
he's actually a director and a small shareholder and a
(15:08):
company that is starting this new idea, and it basically,
instead of borrowing money where the bank gradually eats into
your equity, but you borrow a chunk of money here,
you actually sell a part of your house over a
ten year period. I've got to be nice and circumspect
about this, because when I hear a new idea, I
was get excited about it. But Martin it, I must say,
(15:30):
I'm on the face of it, it sounds like a
bloody good idea.
Speaker 4 (15:34):
Yeah you are. Of course, they're still giving up equity,
so yeah, yes, but you're getting.
Speaker 2 (15:40):
Paid for it's not getting eaten into. And if you
still own seventy percent of the house, if your house
goes up in value, it's still worth seventy percent of
your house, I mean, and I guess so will your
home be with the reverse mortgages.
Speaker 4 (15:56):
You can't. You can't have your cake and eat it too.
What you trading. What you're doing is trading thirty five
percent of your house or lifestyle.
Speaker 2 (16:06):
Yeah, which I'd.
Speaker 4 (16:07):
Argue isn't valuable. And you know, a lot of a
lot of people they're getting their ends super and that
might be thirty five forty thousand dollars a year, depending
on texts and so forth, and they are almost that,
you know, it depends on the size of the house
and so forth. The value of the house, but they
can almost double that and that gives a significantly better lifestyle.
Speaker 2 (16:32):
Actually, just before we go, we actually I'm going to
let some of our callers ask questions because there's a
lot of texts and we're going to have callers who
want to find out a bit more about this. But
I just wanted to touch on one little thing to
get your thoughts about it. It's more just a decision
around retirement that you were talking about. How as you
get older, there becomes an age where you do just
spend less because you're doing less and you're less active,
et cetera. And I my rule of thumb would be
(16:53):
that if I am still living the sort of life
where I'm going to be requiring the same sort of
spending as pre sixty five, I would imagine if I
still felt that I was going to be that busy
and spending that much, I probably still want to be
kept working.
Speaker 4 (17:07):
To be honest, Yeah, yeah, that's right. What is it?
Forty eight percent of people aged sixty five to seventy
are still working. And I think you're right. I think
if you're active and able to work, then you could
very well choose to there's a small ish number of
wealthy people who can afford to fund a very good lifestyle,
(17:31):
A lot of them. You know, I had a lot
of those kind of kinds of people as clients when
they used to be an advisor. But yeah, you know
I have I think if this new book has a
I think the chap brom work is called something like
in praise of work, because work does have a fair
bit going for it, not not just the money, but
social engagement and so forth.
Speaker 2 (17:51):
Social engagement and just keeping active and all that sort
of thing, so long as the work itself isn't destroying
you if you're doing obviously, you don't want to be
working in a coal mine.
Speaker 4 (18:01):
Or up on the roof banging on. That's the one, yeah,
n Or something like something like you need to be
in a job like you and me, we're sitting on our.
Speaker 2 (18:12):
Butts talking good on it. Well I am you? Hey, thanks? Right,
let's take some calls. Paul, Hello, how's it going.
Speaker 5 (18:20):
I just want to ask him a a question. Is
it like reverse morgage? You know, like someone bars the
money over ten years and five years they have to
sell their house to go into a rest home. You know,
does have money? It does whatever's owe on the house
they take, do they take it out or can they
(18:40):
transfer transferred onto the other property day buy because the
only thing I don't like about reverse mortgage is is
so many people that do it and they go into
wrist home. They can't afford to buy a house because
the money's gone.
Speaker 4 (18:58):
Yes, probably there'd be certainly no guarantee of that, and
it would be unlikely because you know, going into a
rest home we being lifetime and come. And I don't
think the reverse mortgage people either, would you know, are
able to lend or buy a little bit of a
(19:18):
of a rest time So you'd have to use the
sixteen in our case, you'd have to use whatever was
left of your equity to buy the rest time? You
not And you might do that, but you might not either.
Speaker 5 (19:33):
Yeah, can you ever do a thing like finances would beat?
You know, we'd invest money be beat because iron about
iron te teen ten thousand dollars before to six weeks
my rentals and just finding somewhere to env invest rest
of money.
Speaker 4 (19:53):
I don't do that personally, and I didn't even do
that when I was a financial advisor. All I did
was give advice to people and help them find somebody
who would be the money for them, of which all,
there are plenty of people around who will do that
for you, and do it quite compotantly.
Speaker 2 (20:12):
It doesn't sound like I've put he's earning that money
in that period of time, and he needs to worry
about the reverse mortgage, that's for sure. But I'm curious questions. Yeah, thanks,
thanks Paul. Let's take another question or call Bruce solo
game all right?
Speaker 4 (20:27):
All right, hi.
Speaker 7 (20:29):
Martin.
Speaker 8 (20:29):
Hey, our situation is that we have a freehold house
and also a freehold commercial building. Now, we took early
retirement a few years ago and we're sort of starting
run out of a bit of bread. Now, what do
one knows if we would have put a reverse mortgage
or a home equity release mortgage on our house and
we sold their commercial property sat in five years time?
(20:50):
Are we able to pay that mortgage off without any penalties?
Speaker 5 (20:55):
Oh?
Speaker 4 (20:55):
What a good question. I'm not sure. I'm not sure
the reverse mortgage would you whether you would have that right,
but you could probably negotiate that. I don't think you'd
be able to do it with lifetime with the with
the home reversion one because you've actually sold say thirty
(21:16):
five percent of the house. You could argue, can we
just buy it back? Well, maybe on a one off
kind of deal, but you'd be an outlier. I'd have
to say brucently. You know, there wouldn't be many people
in that sort of situation.
Speaker 8 (21:30):
Yeah, because the problem we have is that no bank
will need ue any money because we don't really have
an income.
Speaker 4 (21:36):
Yes, yeah, and what about the commercial property that should
be generating an income.
Speaker 8 (21:41):
Yeah, but that gives us enough to live on, I see,
don't money to travel or anything.
Speaker 4 (21:47):
Yeah. Yeah.
Speaker 8 (21:49):
So that's why I sort of thought, until we get
the pension and they maybe say for another two or
three years, if we had a reverse like a Heartland
Bent type mortgage, I think that once we sell the
commercial property to realize some cash that I was hoping,
we'd be able to pay that often and get back
to being free.
Speaker 4 (22:09):
It would be worth going, and it'd be worth going
and talking to them. I mean, I know some of
the people there, they're very good people. They would you know,
they may not be able to do that. Their rules
and so forth in the way they've got their book
structured may not allow them. But I think they'd look
at it for you maybe.
Speaker 2 (22:29):
Actually just quickly proceeds that once you do start getting
the pension, is that your retirement, is that your travel money?
Speaker 4 (22:34):
Is it?
Speaker 8 (22:36):
Well, it will be how it would be helpful, but
it certainly wouldn't let us do any big trips for
say to a few years till we built up a
bit of a bit of cash behind us again. But yeah,
unless there's another suggestion that Martin can make that we
could do well.
Speaker 4 (22:52):
My suggestion actually would be to sell the commercial property
now and have that either invest the money yourself or
more likely have somebody invest it for you, and then
have a draw down rate, so a set amount that
you're going to take each month, which means that you
will run the capital down and be able to spend
(23:16):
it on a monthly basis.
Speaker 8 (23:18):
You mean spend the kids inheritance.
Speaker 2 (23:20):
Now, that's the one.
Speaker 4 (23:21):
Yep, absolutely that it.
Speaker 8 (23:24):
Has occurred to me and certainly is probably one of
the better options. I just thought I'd run a past
you see.
Speaker 4 (23:34):
Yeah, well no, no, I wouldn't ask the they might
say no, I'd have a chance a chat to Heartland.
SBS Bank is the other one who operates who offers
these things as well, So have a chat to s
(23:54):
BS s b S bank.
Speaker 8 (24:00):
Okay, thank you very much for your health.
Speaker 2 (24:01):
Thanks okay, not specific financial advice, by the way, just
have a yat to someone. So the first Morge just
remind me so that basically you borrow money against your
house and they give you a mortgage and they don't
expect you and so instead of repayments, it just starts
to clock up against your equities. So you can still
sell your house, but then you'll have to repay whatever's owing.
Speaker 4 (24:20):
Yes, including the interest, so the interest compounds. Interests have
not paid it. Just the amount of the loan grows
over time, and you'd hope that the house would grow
on value as well, or the kids would hope that
the house would grow in value as well, and it
may do, but of course it hasn't. In the last
couple of years, they've dropped them value on the whole.
Speaker 2 (24:43):
So what's the advantage of the home reversion that you're
outlying so you're selling Just to sum it up again,
you're selling three and a half percent of the house
per year for ten years. What's the advantage over the
mortgage you.
Speaker 4 (24:58):
This probably there's lots of properties in this, but it's
probably more certain than a reverse mortgage, because with a
reverse mortgage you're subject to the vagaries of interest rate
ups and interest rate downs. Now, a reverse mortgages interest
rate is always higher than the common garden home loan
(25:22):
interest rate, and that's because they're not getting the cash
now that wing to wait to get it. But if
interest rates went through the roofs, that would that would
mean that the loan would compound even faster and become
even greater, you know. So there's a bit more uncertainty there,
(25:44):
whereas with the with the home reversion, you know that
you're going to end up having sold thirty five percent
of the house, and you know therefore that you have
sixty five percent of the house's equity. You don't know
what that's going to be worse because you don't don't
know what house prices are going to do in the meantime.
Speaker 2 (26:03):
So you set the price at that period, you sell
the first three and a half percent. I've got a
house worth a million bucks, then you are getting three
and a half percent of.
Speaker 4 (26:15):
A million bucks less fees, less fees, and you get
that as an income. You don't get it as a
lump sum.
Speaker 2 (26:22):
So if your house is doubled in value. In ten years,
you're still selling three and a half for the for
the old price.
Speaker 4 (26:29):
No selling, No, each each year the house is valued.
Speaker 2 (26:33):
Oh really, Oh okay, Well that's that's that's that was
That's caught me by surprise because I thought that one
of the values was that you guys were buying a steak.
But of course the three and a half percent that
the home Reversion company has bought that is worth more
because your own a part of the house. And that's okay.
So you're not locking people in it. You're not locking
(26:55):
people in it.
Speaker 4 (26:55):
Today's prices no so, and tim don't forget, and people,
especially my age, probably your age as well, think that
home prices are a one way street as they always
go up. In the last two or three years, they've
actually gone down quite significantly, not in all markets, spun
in some markets.
Speaker 2 (27:16):
Yeah, that's worth remembering. Right, Let's take some more calls
on this and I'll go through some of that. There's
some good questions. Oh, by the way, I'm just going
to deal with this one before we go to Michael.
It's usually the aggressive questions come with a bit of
an insult, says how thick are you all these mortgage
schemes is to benefit the schemers. Well, everyone's in business,
aren't they, Martin. I mean that's the point. I mean,
(27:38):
you're not doing a lot of charity.
Speaker 4 (27:40):
No lifetime incomers, trying to make a proper you did, right,
I'd be unapologetic about that. You know, you obviously have
to and looking at these you have to look at
the fees, so you know.
Speaker 2 (27:54):
No, you don't have to respond to that. I just
want to. I thought i'd just read that one. Of course,
everyone's in business. I mean I turn up work and
I enjoy doing it, but I do like to get
paid for it too. Okay, right, let's care on where
we're up to Michael.
Speaker 7 (28:06):
Hello, Oh, good afternoon to Mike. I didn't hear the
beginning of Martin's interview, et cetera. So this might be
a stupid question. But who do you sell that thirty
five percent too? Is it relatives? Is it anybody?
Speaker 2 (28:22):
Is it to a company?
Speaker 4 (28:24):
And it's markin carry on? Yes, yes to lifetime income.
You sell it to that. Now we may package that fact.
We will package it up and sell it on. Sell
that and all the other loans that we are all
the other bits of equity we've got to investors who
want to invest in residential property. But you're selling in
(28:46):
the first and instance, you're selling that little bit of
equity repeatedly for a decade. You're selling it to lifetime
income to the company.
Speaker 7 (28:57):
Yes, but my question, yep, my question is I was
just thinking that if that was so, who is it
the company that owns it, or does somebody else buy
into my house or your house?
Speaker 4 (29:13):
We may we will buy your we will buy thirty
five percent.
Speaker 7 (29:19):
Yep.
Speaker 4 (29:19):
We we may package that up and we may sell that.
In fact, we will sell it on to other investors,
because we don't we don't want to.
Speaker 2 (29:27):
So what what I think, what what Michael means is
whose interest is lodged on the title as A as A.
Speaker 7 (29:35):
Because because my question from then on is I used
to own an ex financial advisor and in minor way,
but there are problems, say the next people have a
marriage breakup, or there somebody does something you know, or
they're just good bananas and ruin your house, et ceter.
Speaker 2 (29:58):
Okay, so it's about the it's about who Obviously you
would organize a right to occupy I'm guessing, but yeah,
who's actually on the title.
Speaker 4 (30:04):
You can answer that now, mat Yeah, yeah, both both parties,
both Lifetime and yourself would be on the title and
the percentages of ownership. And you have the right to
stay in the house, providing you you follow all the
rules and look after it and such like you have to.
You have the right to stay in the house until
(30:27):
it until it's sold.
Speaker 2 (30:30):
Yeah. So if you sell the interest on Martin, does
someone else end up lodged in the title as well?
Speaker 4 (30:35):
Yeah? Right, yes, that's the problem.
Speaker 2 (30:39):
Well, it depends on what under what terms. They can't
just yeah, I mean I guess there would be a
caveat on on your on life, on your ownership, wouldn't
it Martin in your company.
Speaker 4 (30:49):
It's a very complicated legal agreement, and I'm not yeah
it will be, Yeah, it will be. This is something
and the same with reverse mortgage. You have to get
good legal advice on.
Speaker 7 (31:05):
When you've got a reverse mortgage, you still own the
whole house.
Speaker 4 (31:08):
Yes, that's right, all be.
Speaker 7 (31:10):
A part of the screen. Whereas this other way. Just
for sake of argument, say there is a marriage break
up and they fight about that thirty five percent of
your house, I don't you know that's that's a rare
trauma for the I'm the older, you get trauma's get magnified.
Speaker 2 (31:28):
You're assuming that someone else's problems are going to mean
that they can argue whether to sell your house. I'm
guessing the legal agreement is that only you can sell
your house.
Speaker 7 (31:38):
I've sold it. I've sold it to these people. They've
given somebody else, another couple and they're happy ever after.
Speaker 2 (31:45):
No, they're not might divorce, yeah, but they don't have
the right to sell your house. That will be part
of the agreement. I'm thinking is that you're not suddenly
buying into a relationship, would be my guess. Of course,
you're not going to do a deal with yourself just
to someone haphazardly or three. I'm probably answering your questions
for you, but I think that Michael was probably at
(32:06):
one on one equals ten.
Speaker 4 (32:11):
Yes. Yeah, the original homeowner who sold down thirty five
percent of their home, they can stay in the house
for as long as they like. When they sell up
for whatever reason, whether it's a marriage breakup or whether
they downsize or whether they go into a rest home.
When they sell up, the proceeds will be after costs
(32:33):
will be divided at whatever percentage. It is probably sixty
five to thirty.
Speaker 2 (32:38):
Five because I think that what Michael was assuming was
what if another couple ended up owning, you know, the homeowner. Yeah,
and it's not subject to that sort of gaos. Yeah,
actually just out of so, how do you once somebody
with a home reversion? Actually, I tell you what. Sorry,
I'm late with a break. We'll come back. I've got
a good question for in more calls to get onto,
(32:58):
so we'll be back in just the tickets eighteen minutes
to six?
Speaker 1 (33:05):
Do you nay go?
Speaker 4 (33:07):
Did machine us?
Speaker 1 (33:09):
And we're not.
Speaker 2 (33:12):
Welcome back to the show. This is Smart Money. I'm
Tin Beverage. My guest is Martin Haugh's author of twenty
three going on twenty four financial books on financial advice,
and we're talking about late minute, last minute sort of
retirement plans. Quick question Martin on the home home reversion
idea where people sell three and a half percent for
(33:33):
ten years of their property. Is there an age qualification
for this?
Speaker 4 (33:37):
Yes, yeah, there is. You've got to be at least
seventy ah and there will be an upper age limit.
I think as well, but I can't recall what that
is off off hand.
Speaker 2 (33:48):
Because I could imagine the young people go and tell
you what, I'm going to buy a house and these
guys are going to own thirty five percent. That's great.
I don't have to pay seventy percent of the house
or whatever.
Speaker 4 (33:57):
You see, it's a ten year deal. Also, so yes,
we're assuming that people have about age seventy peak expenditure.
That's when they want to go to you know, through
their seventies that they're going to spend their money. I'm
in my seventies. I'm going to Europe to go rock
climbing every year, and I'm doing this and I'm doing that.
(34:19):
And so it's that when it's that time that expenditure
is high, and that's when people need the extra income.
Speaker 2 (34:27):
Do you what about the home reversion company? Do they
given that rates are a property tax, do they who
pays the rates and insurance the occupy pays the costs
and looks after the property. Yep? Good only Okay, now right,
let's that's as you say, if you're interested in this
(34:48):
sort of thing, you need to get legal advice. And
Martin certainly not yes advocation for his own companies, just
mentioning that this is another alternative. Let's take another call
a Richard.
Speaker 6 (34:57):
Hello, Hi there, I'm seventy six years old, and I
have a house or properly, it's worth about one point
one million, but it has a four hundred and fifty
thousand dollars mortgage on it due to a marital chef settlement.
(35:20):
And I've also got about four hundred dollars in Kiwi savor,
which is mine. So the questions I have are, does
it is the Is there a requirement of your scheme
that that the mortgages is mortgage free?
Speaker 4 (35:41):
Yes? Yes, the property would need to be mortgage free,
so you'd need to find a way of paying that
in full and have the I don't have no mortgage
on the title, right.
Speaker 5 (35:55):
So it wouldn't.
Speaker 6 (35:56):
It's a situation where if the house is sold, you'd
get thirty five percent. The bank would take fair amount.
I mean, I'm you know, I'm I don't have any
children or anything like that, so and you know I
have the Oscar Wild philosophy, it's better to die penless
(36:17):
and knowing money.
Speaker 4 (36:19):
To you, Taylor, Yeah no, you'd have to have to
clear the clear them more good Richard.
Speaker 2 (36:29):
Yeah, okay, So let me work through some of the
text questions here, somebody's just saying, also, it's it's always
worth remembering the power of compound interest, just as a
general lesson in life. Einstein said compound interest was the
eighth wonder of the world. And then think of an
interest rate of ten percent working against you when it
comes to the reverse mortgages. Yeah, I must say reverse
(36:51):
mortgages to me sort of the devil. But personal opinion
only hello again, says this text. It must have sent
an earlier one. Can I sell the house anytime I want?
And am I?
Speaker 4 (37:04):
Yes?
Speaker 2 (37:04):
Okay, you can? Yes? And does the thirty five percent
owner just get whatever the market value is of its
shares obviously less? Yes, whatever, phase, etcetera. No additional pendally.
Speaker 4 (37:15):
Yep, So we take we take the ownership rusk.
Speaker 2 (37:18):
Are you tied into selling three and a half percent
ten times?
Speaker 4 (37:24):
No, I'm pretty sure you could stop that, Okay, if
you want to know, I've had the income. I don't
need income now, I'm I'm beyond travel. I'm not spending
as much so I thought I would. I don't you know.
I'm pretty sure you can stop.
Speaker 2 (37:40):
But because death would be an out, I would that would.
Speaker 4 (37:44):
Wrap it up most most certainly is and moving out
for whatever reason.
Speaker 2 (37:49):
Yeah, I mean, certainly speaking, death is generally or release
for all your obligations.
Speaker 4 (37:53):
That's right.
Speaker 2 (37:54):
Put a black human there anyway. Yes, we'll be back
in just to take News Talks B eight hundred eighty,
ten eighty. We have time to squeeze another call while
I've looked at some more of the correspondents. Ten to six. Yes,
News Talk said, be with Martin Hawser. Martin, We're going
to do some quick Let's do some quick fire texts
on this whole thing and see what we can get
through in the next three minutes. Martin, which of your
(38:14):
books would you recommend for someone getting close to retirement?
Speaker 4 (38:17):
Thanks Cracking Open the Net. It's my last book. Came
out last year or the year before.
Speaker 2 (38:24):
Yep, excellent Martin. Have you done any comparisons between going
to a retirement village and downsizing for the older person
regarding freeing up cash.
Speaker 4 (38:35):
No, I haven't. But it depends what you're going to
do with the cash when you've downsize, assuming you're going
to spend that, I doubt that there would be a
lot or not, to be honest, now, it depends also
on how long you stay in the retirement village, because
if you stay there, like my mother did the twenty
(38:55):
odd years, her retirement unit was worth an awful lot
less than any unit that she could buy in the
market twenty years later.
Speaker 2 (39:07):
Okay, right, regarding the reversion home reversion, if you decide
to travel and put a tenant in your property, is
that complicate things? That's from Sue.
Speaker 4 (39:17):
Again, looks something I'm really sorry.
Speaker 2 (39:19):
So give the lifetime Yeah, actually we'll give you might
as well give the websites so people go and check
out the information. Where would they go?
Speaker 4 (39:26):
I think it's just lifetime and lifetime income dot co
dot NZ.
Speaker 2 (39:32):
Yeah, and probably if you googled home reversion that may
come up with a New Zealand as well. Okay, that's
another question. Okay, somebody's just as what the contactors? So
we've done that one. I like the concept who descermines
the value of the property as you go in three
and a half.
Speaker 4 (39:50):
There is a process for that, which is obviously quite robust.
You have to in launching any any product like this,
financial product like this, it has to be consumer friendly.
You can't have there the disadvantage the consumers. So the
(40:10):
valuers will have to be involved, but there is also
a process of the disagreement on valuation.
Speaker 2 (40:15):
Yeah, okay, hey, look, I think that it's been a
great conversation because I think, for one, there's an alternative
that's been presented, because I think a lot of people think,
oh God, if the only thing I've got left is
a reverse mortgage. But there are other options. There's the
downsizing option, which you can always look into. You can
get legal advice on the home reversion, or you can
decide you're going to go with the But at least
there are options, so we can discuss other options another time,
(40:39):
can't we, Martin? Yes, indeed, yes, okay, excellent, Hey Martin,
and mountain climbing in Europe and you're doing well?
Speaker 4 (40:48):
Do you go? Still?
Speaker 2 (40:49):
You do use rapes, don't you? You're not free solo?
Speaker 4 (40:51):
Oh yeah, no, no, I'm not free soloing. I want
to live a lot longer yet that.
Speaker 2 (40:57):
Would be what's called a late life crisis free solo
up El Capitan. You've seen that.
Speaker 4 (41:05):
I have absolutely makes the hears on the back.
Speaker 2 (41:11):
Anyway, Hey, thanks so much, And that's Martin Hawes.
Speaker 5 (41:14):
There we go.
Speaker 2 (41:14):
That rout's smart money. Thank you mate, well, thanks my
producer Tyre Robert's great job.
Speaker 1 (41:19):
Tyra.
Speaker 2 (41:19):
We'll look forward to I'm back on at midday tomorrow
and for the rest of the week as well, so
we'll catch you basically every afternoon for the next seven days.
We'll catch you soon, have a great evening.
Speaker 1 (41:31):
For more from the Weekend Collective, listen live to News
Talk zed Be weekends from three pm, or follow the
podcast on iHeartRadio.
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Dateline NBC
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Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.