SBS revamps reverse mortgage product

SBS launched SBS Unwind over the last couple of weeks, and will no longer accept customers for its old 'Advance' reverse mortgage product. 

Unwind is a reverse mortgage that allows customers to borrow against their home, unlocking equity to fund their retirement.

It has a flexible draw-down schedule, unlike the old Advance product, which had a maximum drawdown schedule of five payments in five years.

Borrowers will be charged a floating rate for borrowing against their home, with interest compounding over the course of the loan. People can pay back the loan at any time, or when the occupants have sold up or passed away.

Customers can borrow different amounts – those aged 60 can borrow 15% of the value of their home, while those aged 95 can borrow up to 50%. Borrowers can also ring-fence equity on their home. 

Shaun Drylie, chief executive of SBS Bank, described the new reverse mortgage product as "like an RCF", "that people can draw up or down": "SBS feels reverse mortgages aren't not done very well in New Zealand, and we want to give people a flexible option to call upon."

Drylie told TMM Online he expects more people to look at reverse mortgages in a volatile housing market as they assess their retirement funds.

"At this point in the property market cycle, people might want to hold on longer, given the current uncertainty. People's part-time income, or Airbnb income, might have dried up, so this type of product in an option for them to look at."

SBS will pay a flat referral fee of $500 to advisers for the reverse mortgage product. It comes with a series of stringent checking measures, and customers will be required to seek independent legal advice, and discuss the matter with their families, before proceeding. 

Drylie said changing attitudes would see reverse mortgages become more popular in New Zealand. 

"[Reverse mortgages] may never be as widely accepted here, due to the approach to debt in old age, and people wanting to leave all of their income or properties to their families. But many people don't want their families to live frugally just so they can leave money at the end. They want their family to go and enjoy life. A change in approach is starting to happen."

SBS Unwind will be limited to larger populations where the bank has a branch, Drylie added.