Retirement often brings a challenge that catches people off guard. You may own your home outright, but find that NZ Superannuation alone doesn’t cover the lifestyle you expected. A reverse mortgage is one way to bridge that gap, allowing you to access the value tied up in your property without selling it.
This guide covers how reverse mortgages work in New Zealand, who can apply, what they cost, and what else you should think about before making a decision.
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What Is a Reverse Mortgage?
A reverse mortgage is a loan secured against your home that allows you to access a portion of your property’s equity. Unlike a standard home loan, you do not make regular repayments. Instead, the loan (plus accumulated interest) is repaid when the property is sold, you move into long term care, or you pass away.
The money you receive can be used for anything: home repairs, medical costs, a holiday, a new car, debt consolidation, or simply topping up your day to day income. There are no restrictions on how you spend the funds.
In New Zealand, reverse mortgages are sometimes referred to as retirement equity release loans or home equity release loans. If you’re unfamiliar with the broader category, our guide to home equity release loans explains the different types available.
How Do Reverse Mortgages Work?
Here’s what happens when you take out a reverse mortgage in New Zealand.
Application and valuation. You apply through a lender and your property is independently valued. The lender uses this valuation and your age to determine how much you can borrow.
Funds released. You receive your funds as a lump sum, a series of smaller drawdowns, or a combination of both. SBS Bank’s Unwind product, for example, works as a revolving facility you can draw on as needed.
Interest accrues. Interest is charged on the outstanding balance and added to the loan. Because you make no repayments, the balance grows over time through compounding.
Repayment. The loan is repaid when the home is sold. This typically happens when you choose to sell, move into a rest home, or pass away. Any remaining equity after repayment goes to you or your estate.
Both NZ lenders guarantee that you will never owe more than the sale price of your home. This no negative equity guarantee means your estate cannot be pursued for any shortfall.
Who Is Eligible for a Reverse Mortgage?
To qualify for a reverse mortgage in New Zealand, you generally need to meet the following criteria:
- Age: You must be at least 60 years old. If there are two borrowers, the age of the youngest person is used.
- Home ownership: Your home must be mortgage free or very close to being paid off.
- Property type: Standard residential properties are eligible. Lifestyle blocks, farms, and properties in retirement villages are generally not accepted.
- Property location and condition: The property must meet the lender’s criteria for location, construction type, and condition.
- Independent legal advice: You are required to seek advice from your own solicitor before proceeding.
If the home is held in a family trust, some lenders may still consider the application, though additional requirements apply. SBS Bank allows trust held properties where the borrowers are beneficiaries or life tenants.
Are There Different Types of Reverse Mortgages?
In New Zealand, reverse mortgages share a common structure, but the two providers differ in how the product is delivered.
Heartland Bank Reverse Mortgage is the most established product in the market. You can borrow a lump sum and/or set up a drawdown facility. Heartland also offers a Village Access Loan, which allows you to use your current home’s equity to fund a move into a retirement village before your home is sold.
SBS Bank Unwind Reverse Equity Mortgage operates as a revolving credit facility secured against your home. You can draw on it whenever you like, and interest is added to the balance monthly. SBS also has a “Nominated Resident” feature, which means if one partner passes away or moves into care, the other can remain in the home without triggering repayment.
Both products charge variable (floating) interest rates and both include the no negative equity guarantee.
Typical Reverse Mortgage Terms
While terms vary between lenders and individual circumstances, here are the common elements:
- Borrowing limits: Heartland Bank calculates your maximum borrowing using the formula: (your age minus 45) multiplied by your home’s valuation. A 70 year old with a home valued at $800,000 could borrow up to 25% ($200,000). At age 60 the maximum is typically around 15–20%, increasing to 40–50% at older ages.
- Interest rates: Variable. Heartland’s current rate is 7.75% p.a. (as at January 2026). SBS Bank’s rates are published on their website. Rates can change at any time.
- Loan term: There is no fixed term. The loan runs for as long as you live in the property.
- Fees: Expect establishment fees, valuation fees (typically $600 or more), and legal costs. These are usually deducted from the loan amount so you don’t pay upfront.
- Obligations: You must maintain the property, keep it insured, and continue paying rates.
- Statements: Heartland sends six monthly statements showing the loan balance, interest charged, and remaining equity.
How Much Money Can You Get on a Reverse Mortgage?
The amount depends on your age and the value of your home. As a general guide:
- At age 60, you may borrow around 15–20% of your home’s value.
- At age 70, around 25%.
- At age 80, around 35%.
- At age 90, up to 45–50%.
For a home valued at $700,000, a 70 year old could typically access up to $175,000. The exact amount is confirmed after the lender completes a valuation and assesses your application.
What Is the Current Interest Rate on Reverse Mortgages?
As at January 2026, Heartland Bank’s reverse mortgage rate is 7.75% per annum. This is a floating rate and can change based on economic conditions and the lender’s funding costs.
Reverse mortgage interest rates are typically higher than standard home loan rates. This reflects the added risk to the lender, as no repayments are made during the life of the loan and the lender carries the no negative equity guarantee.
Because interest compounds on the growing balance, the effective cost over time is significant. A $100,000 drawdown at 7.75% p.a. would grow to approximately $211,000 after ten years and around $446,000 after twenty years.
Do You Have to Pay Back a Reverse Mortgage?
Yes, but not while you are living in your home. Repayment is triggered when:
- You sell the property.
- You move into long term residential care.
- You pass away (in which case your estate repays the loan from the sale of the home).
- You breach the loan conditions (for example, failing to maintain the property or pay rates and insurance).
You always have the option to make voluntary repayments if you choose, but you are not required to. Some borrowers choose to pay down interest periodically to slow the growth of the loan balance.
Will I Lose My Home with a Reverse Mortgage?
No. You retain ownership of your home and the right to live in it for as long as you wish, provided you meet the terms of the loan agreement. The lender cannot force you to sell.
Both Heartland Bank and SBS Bank guarantee lifetime occupancy. The loan is only repaid when you leave the property, whether by choice or on passing.
It is important that both partners are named on the loan if you are a couple. If only one person is named and that person passes away, the loan may become repayable, potentially leaving the surviving partner without a home. SBS Bank’s Nominated Resident feature is designed to protect against this.
Can a Reverse Mortgage Be Refinanced?
Refinancing a reverse mortgage is possible in some cases, though options are limited in New Zealand given there are only two providers. You may be able to:
- Top up your existing reverse mortgage if you have sufficient remaining equity.
- Transfer your reverse mortgage to a new property if you move (some lenders offer portability).
- Switch providers, though this would involve repaying the existing loan and establishing a new one.
If you are considering refinancing, speak to an independent mortgage adviser who can assess your equity position and explore what’s available.
Can You Walk Away from a Reverse Mortgage?
You can repay a reverse mortgage at any time by selling your home or using other funds. There is no lock in period in the traditional sense, though you should check whether early repayment fees apply under your particular loan agreement.
If you decide a reverse mortgage is not right for you after signing but before settlement, there may be a cooling off period depending on your lender’s terms. Your solicitor can advise on this during the independent legal review, which is a required step before the loan is finalised.
Reverse Mortgage Alternatives
A reverse mortgage is not the only way to access funds in retirement. Depending on your situation, other options may be worth exploring.
Lifetime Home. A debt free equity release product for homeowners aged 70 and over. Rather than taking a loan, you sell a portion of your home’s equity in exchange for regular income payments over ten years. There is no interest and no debt. We compare the two products in detail in our guide to reverse mortgages vs Lifetime Home. [update URL and add link once published]
Downsizing. Selling your current home and buying something smaller can free up cash. However, in many parts of New Zealand, the price difference between a larger and smaller home may not be as large as expected once transaction costs are factored in.
Council rates relief. Some local councils offer rate deferment schemes for homeowners on NZ Super. This allows you to defer payment of rates, with the amount owing secured against your property and repaid when the home is sold. Check with your local council or visit your council’s website for details.
Taking on a boarder. Renting a room in your home can provide regular income without reducing your equity. The first $250 per week of boarder income is generally tax free under the IRD standard cost method.
KiwiSaver withdrawal. If you have a KiwiSaver balance and are over 65, you can withdraw some or all of your savings to supplement your income. Talk to our team for KiwiSaver advice.
Borrowing from family. An informal family loan may avoid the costs of a reverse mortgage, though it is wise to formalise any arrangement with a legal agreement to prevent misunderstandings.
Subdividing. If your property is large enough, subdividing and selling a section can release funds while allowing you to stay in your home.
Frequently Asked Questions
Is a reverse mortgage taxable?
Funds received from a reverse mortgage are classified as a loan advance, not income. They are not subject to income tax under current IRD rules.
Does a reverse mortgage affect my NZ Super?
A reverse mortgage does not affect your NZ Superannuation payments. Because the funds are a loan, they are not counted as income by Work and Income.
What happens if my house value drops?
If your home’s value decreases, the no negative equity guarantee protects you. You will never owe more than the sale price, even if the loan balance exceeds the property’s value at the time of sale.
Can I still leave an inheritance?
Any inheritance left will be reduced by the outstanding loan balance. Because interest compounds over time, the longer the loan runs, the less equity remains for your estate. If preserving an inheritance is important to you, discuss this with your adviser.
What if I need to move into residential care?
Moving into residential care is typically a repayment trigger. If you move permanently, the home would be sold and the loan repaid from the proceeds. Some lenders allow the loan to be transferred to a new property, so check your options if you are considering a retirement village.
What types of properties are excluded?
Lifestyle blocks, farms, leaky buildings, and properties within retirement villages are generally not eligible. The property must be a standard residential home that meets the lender’s criteria for location, construction, and condition.
Making the Right Decision
A reverse mortgage is a significant financial commitment with long term consequences for your equity and your estate. It can be the right solution for some retirees, particularly those who want to remain in their home and need a lump sum or ongoing access to funds.
Before proceeding, take the time to:
- Seek independent legal advice (this is a requirement of both lenders).
- Talk to a qualified financial adviser who can review your full financial picture.
- Discuss the decision with your family or whānau, as it affects future inheritance.
- Use a retirement calculator to understand your projected retirement income.
- Read the Te Ara Ahunga Ora (Retirement Commission) resources on planning for retirement.
If you would like to talk through your options with someone who understands how these products work in practice, get in touch. We can help you see the full picture and make a decision that fits your situation.
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 reverse mortgages or equity release products.
