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