If you own your home outright but find that NZ Super doesn’t stretch far enough, you’re not alone. Around two thirds of New Zealanders aged over 65 own their home, yet many have little to no savings beyond superannuation. The result is a common retirement challenge: plenty of wealth tied up in property, but not enough cash to live comfortably.
Two products aim to solve this problem. Reverse mortgages have been available in New Zealand for years. Lifetime Home, launched in 2024, offers a newer debt free alternative. Both allow you to access the value in your home without selling it, but they work in different ways.
This guide compares both products so you can understand the key differences and decide which option may suit your situation. If you’re new to equity release, our guide to home equity release loans covers the basics.
Table of Contents
What Is a Reverse Mortgage?
A reverse mortgage is a loan secured against your home. You receive a lump sum or regular drawdowns, and no repayments are required while you live in the property. The loan, plus accumulated interest, is repaid when the home is sold or you pass away.
In New Zealand, Heartland Bank and SBS Bank are the two providers. To be eligible, you must be at least 60 years old and own your home outright or have very little mortgage remaining.
The amount you can borrow depends on your age, ranging from around 15% of your home’s value at age 60 up to 40% or more at older ages. You can take the funds as a single lump sum, a series of smaller drawdowns, or a combination.
Interest Rates and Compounding
This is where reverse mortgages become costly. Interest rates typically sit between 7.75% and 10% per annum, and interest compounds on the outstanding balance. Because you make no repayments, the loan grows over time.
To put that in perspective, a $100,000 drawdown at 10% interest would grow to roughly $270,000 in debt over ten years. If house prices grow more slowly than the interest rate, the loan can consume a large share of your equity.
Both NZ providers offer a no negative equity guarantee, meaning if the loan balance exceeds the sale price of your home, neither you nor your estate will be required to cover the shortfall. The New Zealand Bankers’ Association Code of Banking Practice sets minimum standards that apply to these products.
What Is Lifetime Home?
Lifetime Home is New Zealand’s first debt free equity release product. It is operated by Lifetime Retirement Income and is designed for homeowners aged 70 and above.
Rather than taking a loan, you sell a portion of your home’s equity to Lifetime Home in exchange for regular income payments. There is no mortgage, no debt, and no compounding interest.
How a Lifetime Home Sale Works
Lifetime Home purchases up to 35% of your home’s equity, based on a mutually agreed value following an independent valuation. Ownership transfers gradually at 3.5% per year over ten years.
In return, Lifetime pays you approximately 25% of your home’s agreed starting value (less fees and charges) as regular income over the same ten year period, at a rate of 2.5% per year. Payments are made fortnightly or monthly, timed to arrive on the same day as NZ Super.
After ten years, you retain 65% ownership of your home. You can stay in the property for life. You also have the option to extend the arrangement and release further equity, up to a maximum of 50% of the home’s value.
When the home is eventually sold, Lifetime receives its proportional share of the sale proceeds. If the property has increased in value, both you and Lifetime benefit. If it has decreased, both share the loss.
Reverse Mortgage vs Lifetime Home: A Side by Side Comparison
| Feature | Reverse Mortgage | Lifetime Home |
|---|---|---|
|
Product type |
Loan (debt) |
Partial home sale (no debt) |
|
Minimum age |
60 |
70 |
|
Providers |
Heartland Bank, SBS Bank |
Lifetime Retirement Income |
|
Interest rate |
7.75%–10% p.a. (variable, compounding) |
None |
|
How you receive funds |
Lump sum and/or drawdowns |
Regular fortnightly or monthly payments over 10 years |
|
Amount accessible |
15%–40% of home value (age dependent) |
~25% of home value paid out; 35% equity sold |
|
Impact on equity |
Unpredictable – grows with compounding interest |
Fixed – 35% over 10 years, known from day one |
|
Occupancy rights |
Lifetime |
Lifetime (subject to agreement terms) |
|
Negative equity protection |
Yes – guaranteed by lender |
N/A – no debt involved |
|
Impact of rising property values |
Reduces net cost of borrowing |
Both parties share gains proportionally |
|
Inflation risk |
Loan balance grows; offset if house prices keep pace |
Payments are fixed, so purchasing power declines over time |
Key Differences to Understand
Debt vs No Debt
The most significant difference is that a reverse mortgage creates debt, while Lifetime Home does not. With a reverse mortgage, interest compounds daily and the loan balance grows every year. With Lifetime Home, you sell equity at a discount to market value, but there is no loan and no interest.
Certainty of Outcome
With Lifetime Home, you know from the outset that you will retain 65% ownership after ten years. With a reverse mortgage, the final equity position depends on how long the loan runs, the interest rate, and how property values move. This makes it harder to predict what will be left.
Flexibility vs Structure
Reverse mortgages offer more flexibility in how and when you access funds. You can take a lump sum for a large expense or draw down smaller amounts as needed. Lifetime Home provides a structured income stream, which suits retirees looking for a regular top up to NZ Super but may not suit those who need a large upfront sum.
Age Eligibility
Reverse mortgages are available from age 60, making them accessible earlier in retirement. Lifetime Home requires you to be at least 70, meaning it is designed for later stage retirement planning.
Costs and Fees
Both products carry setup costs including legal fees and property valuations. Reverse mortgages charge compounding interest, which is their main ongoing cost. Lifetime Home charges establishment fees and ongoing annual fees, and the homeowner remains responsible for rates, insurance, and maintenance throughout.
Which Option Might Suit You?
The right choice depends on your age, how you want to receive funds, and how much certainty you want over your remaining equity.
A reverse mortgage may suit you if:
- You are between 60 and 69 (below Lifetime Home’s eligibility threshold)
- You need a lump sum for a large one off expense such as home repairs, medical costs, or debt consolidation
- You want to draw down smaller amounts over time as needed
- You are comfortable with variable interest and understand the compounding effect
Lifetime Home may suit you if:
- You are 70 or older and want to supplement NZ Super with regular income
- You want to avoid taking on debt in retirement
- You value certainty about how much equity you will retain
- You plan to stay in your home long term
Important Things to Keep in Mind
Both products have long term financial consequences that affect your estate and your future options. Before committing to either, you should seek independent legal and financial advice.
Te Ara Ahunga Ora Retirement Commission provides free retirement planning resources and tools. The Citizens Advice Bureau can also help you find independent advice in your area.
If you are weighing up your options, talking to a qualified mortgage adviser (like Matt and the team here at OneStop Financial Solutions) who understand both products can help you see the full picture. The right solution depends on your personal circumstances, your goals, and how you want your retirement to look.
Disclaimer: This article is for informational purposes only and does not constitute personalised financial advice. Matt Willoughby is a registered financial adviser (FSP702911). Please seek professional advice before making decisions about equity release products.
