Most people have heard of a reverse mortgage, but a home reversion scheme isn’t something a lot of people know much about. A home reversion scheme allows a homeowner to sell part of their property in exchange for a lump sum or regular payments. Some of the benefits include enjoying a more comfortable retirement, the ability to pay for ongoing home maintenance costs, still being able to share in the property value increases, and no interest payments (there is no lending). Like everything, there are some disadvantages, such as the obvious fact that you don’t own 100% of the property anymore, and there can be substantial upfront fees.

More and more lenders are reducing interest-only terms for investors, so is it still worthwhile? The problem comes when the interest-only term comes up for renewal. The only options are applying for an extension with the current lender or refinancing to another lender. Both involve a full loan application and a lot of time providing information to your mortgage broker or lender. Applying for an extension may seem like the easiest option, but people often forget the higher serviceability costs that come with calculating the loans over the shorter remaining term.

A local property investor I recently met, who self-manages a rental property in Auckland, mentioned she wasn’t doing regular inspections of the property. This rang alarm bells for me, as her insurance could be voided (most insurance policies require quarterly inspections). Regular inspections also ensure maintenance issues are caught early, and they are also a good opportunity to meet and keep open communication with your tenant.