Housing options for our older clients

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As we all age we need to carefully consider what housing options will suit us best in our twilight years.

The growth of retirement villages has been steady and continuous with all the major players investing heavily into new villages.  Retirement village living is not for everyone.  The first objection some people have is the significant loss on resale.  There is a ‘village contribution’ component which can be as high as 30% of the initial cost usually factored in so that it is fully payable after five years’ occupation.  This means that if a resident has paid $800,000 for a right to occupy a villa or apartment and after five years’ of residence dies or decides to move out they might only receive $560,000.00 back.  This could seem quite galling if the village then on sells the same unit for $1,000,000 or more.

It is clearly not an investment but a lifestyle choice. An intending resident needs to balance a number of different factors before making such a choice. This conversation is one we have with many clients in which we discuss what such a decision entails with both advantages and disadvantages being clearly set out for them

Another option some clients consider is a lifetime loan.  Some banks offer clients an option to borrow money (at a higher than normal rate of interest) on the basis that no interest is paid until their property is sold or after the client has died.  The amount advanced depends on the age of the client and provision is made for a limit, so if a client can borrow $100,000, they can borrow say $40,000 and use it for repairs, buy a car, or enjoy a holiday, and borrow the additional $60,000 at a later date.   The advantage is that no payments need be made on the loan.  The downside is the interest accrues and is compounded over the life of the loan.   It will never exceed the value of the property but certainly eats up the equity.

Another option to consider is for clients to release equity by selling up a larger house and downsizing.  This gives more money for lifestyle expenses and funds are available to pay for taxis in the event that driving is no longer possible

Have you considered renting?  A property can be sold and capital can be retained and invested to fund renting a property.  There is of course less security, but in some cases this option should not be discounted

Whatever choice you wish to explore, Gaze Burt can assist with reviewing your circumstances and discussing your needs. Please contact Neil Evans if you’d like assistance in making the right decision for you.

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Neil Evans
Consultant

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