Lifetime Home Review - Making Sense of a Home Equity Release Product

Our guide to Lifetime's Home Equity release product explains the eligibility criteria, how the product works, pros and cons, costs and fees, real-life examples of how it works, comparisons with taking a reverse mortgage, alternatives, frequently asked questions and other key information to help you understand what's involved.

Lifetime Home Review - Home Equity Release NZ

Updated 10 November 2024

Summary:

Too many New Zealanders retire with a house paid off, but there is very little money set aside, and arguably, low-value KiwiSaver balances.
More New Zealanders are living longer and seeking ways to maintain their lifestyle post-retirement - NZ Super payments are designed to pay for essential costs, not lifestyle expenses.
Traditionally, options like reverse mortgages have been available to those looking to tap into their home's value. However, the costs are significant given that most lenders over the last five years have charged between 7% p.a and over 10% p.a. compounding interest, vaporising home equity when they're finally repaid. Our guide to reverse mortgages looks at this in detail, and you can see the latest reverse mortgage rates from Heartland Bank and SBS to get an idea of the costs.
Lifetime Home is an alternative for retirees aged 70 and above. It is a debt-free equity release model that allows homeowners to convert their property's value into a steady, regular income stream without taking on additional debt or interest.
Lifetime Home's approach is arguably more complicated than a standard reverse mortgage. Still, once understood, it provides a straightforward, transparent solution to retirement income needs without the debt sting of a reverse mortgage.
Lifetime Home allows homeowners to continue living in their homes while unlocking a portion of their property's value, offering financial stability and peace of mind.

Our review explains the specifics of Lifetime Home, its pros and cons, and the financial implications, including fees and costs, limits and restrictions. We also look at real-life examples, compare this model with traditional reverse mortgages, and address the potential risks and impacts on inheritance. We cover:

Important Checklist for Anyone Considering Lifetime Home:

Before making any decisions related to Lifetime Home’s equity release product, we urge you to read this detailed review in full to understand the product comprehensively.
This is not a simple decision - once you agree, you commit to an arrangement where Lifetime Home will own a percentage of your home.
Do Not Proceed If You Do Not Fully Understand This Product.

Our review has been published to help explain how it works. Please take the time to thoroughly understand:

Eligibility Requirements
How the Product Works
Pros and Cons
Financial Commitments (e.g., the fees, ongoing costs, and potential risks like house market fluctuations).
Ownership Implications – Understand that Lifetime Home will hold a significant share (e.g., 35%) of your property and what this means for your estate and long-term plans.
Comparisons with a Reverse Mortgage and Downsizing
Our Examples and FAQs

Know This First: What Makes Lifetime Home Unique?

Lifetime Home promotes its commitment to a debt-free approach for retirees. Traditional equity release options like reverse mortgages involve borrowing against the home's value, with interest compounding over time.
While we understand the average balance drawn on reverse mortgages to be around $50,000 to $100,000, such sums can significantly erode the home equity value, which means less money is available for retirement villages, nursing homes and/or inheritance.
In contrast, Lifetime Home offers a model where homeowners sell a portion of their equity, incrementally, over a specific time, receiving regular income payments over a set period—typically ten years. This approach provides certainty, flexibility, and security, ensuring homeowners avoid the trap of a reverse mortgage, which can see a $100,000 advance in 2024 balloon to a debt of $270,000 over ten years (applying a 10% p.a. interest rate).
Know This: Our review comprehensively analyses Lifetime Home and is the first deep dive into the product to be published. We cover every aspect to help you make an informed decision about whether it's right for you. From our guides to reverse mortgages and retirement income products, we know that readers may be considering this for themselves or a loved one and that understanding the ins and outs of Lifetime Home is essential for determining if it aligns with your financial goals and retirement planning needs.

Eligibility Criteria for Lifetime Home

Lifetime Home has a specific set of eligibility criteria that homeowners must meet to qualify for the equity release option:

Minimum Age Requirement: You and your partner must be over 70. This age limit ensures that Lifetime Home is tailored to older homeowners seeking a retirement income solution.
Owner-Occupier Status: The property must be your primary residence, and you must be registered on the title. Rental properties, holiday homes, or investment properties do not qualify.
Homes in a Trust: If your home is within a Trust, it is still eligible for Lifetime Home, provided other criteria are met.

Property-Specific Requirements

Location: Lifetime Home does not operate in all areas. While it covers locations beyond the main centres, not every area meets its pre-qualified criteria.
Property Type: Currently, only standalone residential dwellings are accepted. Apartments, townhouses, flats, and properties on leasehold titles are excluded. This focus ensures that only freehold titles are considered.
Mortgage-Free Requirement: To qualify, your property must be free of any mortgages or encumbrances. Lifetime Home does not allow homeowners with existing mortgages to participate.
Insurance Requirement: The property must be adequately insured and remain so for the duration of the agreement. This is crucial for maintaining the home's value and ensuring its protection.

Currently Not Eligible

Properties that are classed as unit titles (including apartments and townhouses), and homes which are not your primary residence, such as rental or investment properties, are not eligible for Lifetime Home.

Important: Before proceeding, Lifetime Home conducts a pre-qualification check to assess whether your home meets these criteria. This step is essential for determining if you qualify and ensuring you have all the information needed to make an informed decision.

How Lifetime Home Works - A Step by Step Outline

Lifetime Home allows homeowners to convert their property's equity into a regular income stream while retaining the right to live in their home. We explain how the process unfolds in detail:

Step 1: Equity Release Mechanism

Initial Valuation: The process begins with Lifetime Home determining the Initial Value of your home through an independent valuation. This valuation is crucial as it sets the foundation for calculating the income payments you will receive. Homeowners and Lifetime Home Limited must agree on this value, ensuring a fair and transparent starting point. If there is no agreement on the home valuation, then Lifetime Home won't proceed.
Selling a Portion of Equity: Homeowners typically agree to sell a 35% interest in their property to Lifetime Home Limited. This equity accrues over ten years at 3.50% per annum. Unlike a traditional loan or reverse mortgage, this arrangement does not involve borrowing money or accruing interest, making it a debt-free option.
Income Payments: In exchange for selling this equity portion, Lifetime Home provides homeowners a regular income stream. This income is calculated as 2.50% of the home's Initial Value, less fees, paid fortnightly for ten years. For example, if your home is valued at $1,000,000, you would receive an annual income of $25,000, less fees of around $2,300, resulting in approximately $873 in fortnightly payments. There is no tax charged on the payments.

Step 2: Regular Income Payments

Steady Income Stream: The core benefit of Lifetime Home is the provision of a steady, predictable income stream. These payments are made fortnightly and are designed to supplement your NZ Superannuation payments, helping to cover day-to-day expenses or allowing you to maintain a more comfortable lifestyle during retirement.
No Debt Accumulation: Unlike traditional loans or reverse mortgages, which accumulate interest over time, Lifetime Home's model involves no interest. You are not taking on additional debt but rather unlocking the existing value of your home in exchange for regular payments. This is a significant difference between Lifetime Home and a reverse mortgage from Heartland Bank and SBS.

Step 3: Ownership Structure and Rights

Retaining Ownership: One of the most reassuring aspects of Lifetime Home is that you retain most of your home's ownership. By the end of the ten years, you typically retain 65% property ownership. This means that while you have unlocked a portion of your home's value for income, you still maintain a significant stake in your property. However, Lifetime Home has a 35% share in your home, a significant aspect of their offering.
Right to Occupy: Even after the ten-year term ends, you retain the right to live in your home for as long as you wish, subject to the terms of the agreement. This guarantees security and allows you to remain in familiar surroundings without the pressure to move or downsize.

Step 4: Flexibility After Ten Years

Extending the Agreement: The regular income payments cease after the initial ten-year period. However, homeowners can extend the agreement if desired, potentially releasing further equity for additional income. Any further equity released would not exceed 50% of the home's value, balancing your needs and retaining home ownership.
Exploring Other Options: If extending the agreement is unsuitable, you can explore other options, such as retaining full ownership or selling the home. If you choose to sell, Lifetime Home will receive its agreed share of the sale proceeds, and you will retain your portion based on the remaining ownership percentage.

Step 5: Shared Outcomes and Sale Proceeds

Shared Proceeds Upon Sale: When the home is eventually sold, whether during or after the ten years, the sale proceeds are shared between you and Lifetime Home Limited. If the property's value has appreciated, the gain is shared in the agreed proportions (e.g., 65% for the homeowner and 35% for Lifetime). If the property's value has decreased, the loss is shared similarly. Lifetime Home takes this risk; hence, it is focused on getting an independent valuation.
Long-Term Occupancy: If you decide not to extend the agreement after ten years, you still retain the right to live in your home for as long as it is safe and you comply with the terms of the agreement. This ensures that your living situation remains secure regardless of market conditions or changes in personal circumstances.

Know This: Lifetime Home provides a structured yet flexible approach to releasing home equity, offering retirees a reliable income stream without debt. By selling a portion (e.g. 35%) of your home's equity upfront, you can receive regular payments for ten years while retaining the right to live in your home. We believe the process is designed to be transparent and fair, ensuring you and your family have clarity and control over your financial future.

Pros and Cons of Lifetime Home

There's a lot to consider. We outline what you need to know in detail:

Pros

1. Debt-Free Income

No Accumulating Debt: One of the most significant advantages of Lifetime Home is that it offers a way to access the equity in your home without accruing debt. Traditional reverse mortgages involve borrowing against your home's value, with interest compounding over time – currently around 9% p.a. from both Heartland Bank and SBS. Reverse mortgages almost always lead to a situation where the debt grows at a compounding rate and can consume a high percentage of the home's entire value.
Equity Sale vs Loan: Unlike a Reverse Mortgage, Lifetime Home allows you to sell a portion of your home's equity upfront, providing a steady income stream without any repayment obligations. This means that homeowners can enjoy the financial benefits of their property's value without the stress of owing money or having interest accumulate.

2. Certainty and Financial Stability

Predictable Ownership: It is critical to know exactly how much of your home you will still own after the ten-year period. Typically, homeowners retain 65% ownership of their property; this certainty can be reassuring, particularly for those concerned about how their decisions might impact their plans (retirement villages, nursing homes) and inheritance considerations.
Regular Income Stream: Lifetime Home provides a predictable, steady income stream that can significantly supplement your NZ Superannuation. These payments are made fortnightly and can help cover everyday living expenses healthcare costs, or even enable a more comfortable lifestyle. Knowing that you will receive a fixed income every two weeks can arguably enhance your sense of financial security during retirement.

3. Security of Tenure

Right to Remain in Your Home: Many retirees fear leaving their homes. Our view is simple: Lifetime Home addresses this concern by guaranteeing the right to live in your home for life, subject to the terms of the agreement. This means you can remain in your home, maintain your lifestyle, and enjoy the comfort of your home without the fear of being forced to move.

4. Transparent Fee Structure

Clear Upfront Costs: Lifetime Home emphasises transparency in its fee structure, ensuring homeowners are fully informed of all costs. This includes an establishment fee, annual fees, and post-ten-year fees. The establishment fee is 0.20% of the home's Initial Value, and the annual fee for the first ten years is 0.23%, inclusive of GST. This fee is deducted from the ongoing payments. For example, if you receive $1,000 every fortnight (gross), your payment would be $977 (net of $23 fees).
Ongoing Fees and Responsibilities: After the initial ten years, a fixed fee of $1,000 per annum is charged for Lifetime Home's arrangement. This fee is adjusted for the Consumer Price Index (CPI). While these fees are important, their transparency ensures no surprises.

5. Flexible Options Post-Agreement

Extending the Agreement: Lifetime Home offers flexibility after the initial ten-year period. If you wish to continue receiving income, you can release further equity in your home, provided it does not exceed 50% of the home's value. This allows you to adapt the agreement to meet your evolving needs and financial situation.
Freedom to Explore Other Options: If extending the agreement is not in your best interest, you can also explore other options. For instance, you might sell the property or consider other financial arrangements. The key is that Lifetime Home does not lock you into a rigid framework or an aggressively compounding loan (as with Reverse Mortgages). Instead, we believe Lifetime Home offers flexibility that can be tailored to your circumstances.

6. Family and Estate Planning Considerations

Inheritance Clarity: By knowing how much of your home you will retain (in most cases, 65%) and what portion has been sold (e.g. to Lifetime Home, 35%), you have a clearer picture of what you can leave in your will as a way of inheritance. This transparency allows for better estate planning and open discussions with family members about the impact of your decision on their potential inheritance. It is clearer to value than a reverse mortgage, which continues to incur compounding interest costs.
Peace of Mind: For many retirees, peace of mind is invaluable. The security of knowing that you will have a regular income, the ability to stay in your home, and a clear understanding of the agreement's terms can greatly reduce anxiety and improve your overall quality of life during retirement.

Pros of Lifetime Home – Our Overall View: Lifetime Home's benefits revolve around providing a debt-free, secure, and flexible solution for accessing home equity. Offering a regular income stream without the burden of accumulating debt or interest allows retirees to maintain financial stability and enjoy their retirement years with peace of mind. The transparent fee structure and the lifelong occupancy guarantee enhance its appeal as a retirement income solution.

Cons

While Lifetime Home offers several unique advantages, it's important to consider some potential downsides and limitations to ensure a fully informed decision.

1. Reduction in Inheritance

Impact on Estate Value: By selling 35% of your home's equity (and more if you choose to extend after ten years) to Lifetime Home, you effectively reduce the portion of your property that can be passed on through inheritance. After ten years, Lifetime Home owns a share of the property, which means your estate will be smaller than if you had retained full ownership. For example, if your home sells for $1m, your estate will receive around $650,000 (if you agreed to a ten-year ownership share), divided among those in your will.
Shared Appreciation: If your property appreciates, Lifetime Home will share in this increase. For example, if your home's value significantly rises over the ten years, Lifetime Home would receive 35% of the appreciated sale price. This isn't necessarily a 'con' per se, given that a decrease in house prices means Lifetime Home risks taking a loss. However, if your $1m home (at year 1) is worth $1.5m in year two, Lifetime Home is entitled to 35% of the sales proceed (around $525,000) s, even if they paid you $250,000 over the ten years (e.g. 2.50% of your home value, every year, for ten years).

2. Long-Term Commitment

Ten-Year Agreement: Entering into a Lifetime Home agreement is a long-term decision you must make very carefully. You receive a steady income for the first ten years, which also means committing a portion of your home's equity for this duration. While the agreement offers flexibility after this period, it's a significant commitment that requires careful consideration.
Limited Flexibility in the Short Term: The options to make changes are limited during the ten-year term. While you can require the home to be sold at any time, there is no obligation for Lifetime Home to sell its interest back to you. This could limit your ability to make major financial adjustments or react to significant changes in your circumstances.

3. Ongoing Financial Responsibilities

Maintenance and Upkeep Costs: As a homeowner, you are responsible for maintaining the property, keeping it in good condition, and ensuring it remains adequately insured and the rates bill paid. These ongoing costs can add up, especially if the property requires significant repairs or insurance premiums increase over time. However, Lifetime Home doesn't contribute to these costs, which means they benefit from any increases in the home's value while avoiding the ongoing costs of home ownership (which are not insignificant). Furthermore, costs like roof repairs, renovations, and repainting benefit you in terms of comfort, but Lifetime Home won't contribute to these despite owning up to 35% (or more if you extend) of your home. They will, however, benefit when it's time to sell the home.
Rates and Insurance: You are also responsible for paying all rates and other charges associated with the property. While the income from Lifetime Home can help cover these expenses, it's essential to budget for these costs to ensure they do not become a financial strain. Lifetime Home won't contribute despite owning up to 35% (or more if you extend) of your home.

4. Fees and Charges

Initial and Ongoing Fees: Lifetime Home involves certain fees, including an establishment fee of 0.20% of the Initial Value and an annual fee of 0.23% for the first ten years. After ten years, there is a fixed fee of $1,000 per annum, adjusted with CPI. While these fees are transparent and arguably not inconsistent with other financial products, they reduce the overall income you receive from the equity release, given that the fees are deducted immediately from the gross payments
Know This: While the fees are clearly outlined and designed to be manageable, they slightly reduce the overall income you receive. As such, it's important to be aware of how much these reductions are when evaluating how much income you will benefit from over the ten years.

5. Limited Property Types and Eligibility

Eligibility Criteria: As outlined above in the Eligibility Criteria, Lifetime Home is not available to everyone. To qualify, you must be 70 or older, and the property must be your primary residence, mortgage-free, and, in most cases, not a leasehold or unit title estate. Not all properties or homeowners will be eligible for this equity release option.
Property Location and Type: The product is only available for standalone residential dwellings with freehold titles. Apartments, townhouses, and properties in certain locations may not qualify. This could limit the product's availability to some homeowners who might otherwise benefit from equity release.

6. Potential Market Risks

Property Market Fluctuations: The value of your property may fluctuate over time due to changes in New Zealand's (arguably) inflated and volatile real estate market. While this affects both the homeowner and Lifetime Home proportionally, it could impact the dollar amount of equity you retain and the final proceeds from the eventual sale of the home.
Future Policy Changes: Although the payments are currently not taxable and do not affect NZ Superannuation as it's not means tested, future changes in government policy or regulations could potentially impact the terms of the agreement or its financial implications. For example, there is a risk, arguably remote, that at a certain point, you sign up to Lifetime Home, lock in for ten years and government policy either means-tests Superannuation (reducing or increasing payments) and/or decides to tax such an income arrangement. Again, the risks are low, but ten years is a long time to commit, and government policy and laws can change.

7. Complexity and Need for Professional Advice

Understanding the Agreement: Entering a Lifetime Home agreement involves legal and financial complexities. It requires a thorough understanding of the terms and long-term implications, making professional legal and financial advice essential. Some individuals might find the process overwhelming or confusing without the right guidance.
Decision-Making Pressure: Selling a portion of your home's equity is significant and often emotional. It requires careful consideration, discussion with family members, and independent legal advice, which complicates decision-making.

Cons of Lifetime Home – Our Overall View: While Lifetime Home offers a compelling way to unlock home equity without getting into the arguable compounding debt trap of a reverse mortgage, it's important to consider the potential drawbacks, such as the impact on inheritance, long-term commitment, ongoing responsibilities and costs of running a home, and Lifetime Home's fees. What you decide to do is a big decision and requires careful consideration, open discussions with family, and seeking professional advice, which is crucial to ensuring that this option aligns with your long-term financial goals and personal circumstances.

Costs and Fees of Lifetime Home – What You Need to Know

While Lifetime Home offers a debt-free approach to accessing home equity, initial and ongoing costs are associated with the agreement, and the costs (initial, ongoing, and later on when you own your home) are not insignificant. We explain these costs in detail:

1. Initial Costs

Legal Advice: A key requirement for entering into a Lifetime Home agreement is obtaining independent legal advice. This ensures that homeowners fully understand the terms and implications of the agreement. You are responsible for the cost of this legal advice, which varies depending on the lawyer's fees. This is an additional upfront cost and an essential step to ensure that you make an informed decision.
Independent Valuation: Before the agreement begins, an independent valuation of your property must determine its Initial Value. This valuation is crucial as it sets the basis for calculating your income payments over the ten-year period. Homeowners must arrange and pay for this valuation, with Lifetime Home providing a list of accredited valuers. The cost of this valuation will depend on the market rates and the complexity of the property assessment.
Establishment Fee: Lifetime Home charges an establishment fee of 0.20% of the initial value of your home, including goods and services tax (GST). For example, if your home is valued at $1,000,000, the establishment fee would be $2,000. This fee covers the administrative costs of setting up the agreement and is usually deducted from the initial income payments.

2. Ongoing Fees

Annual Fee: During the first ten years of the agreement, an annual fee of 0.23% of the home's Initial Value is charged. This fee also includes GST and is designed to cover the ongoing administration and management of the agreement. For a property valued at $1,000,000, this annual fee would amount to $2,300 per year. It's important to note that this fee is deducted from your income payments, so it's factored into the overall financial plan.
Post-Ten-Year Fee: After ten years, if you choose to extend the agreement, a fixed fee of $1,000 per annum applies for the first year, adjusted annually according to the Consumer Price Index (CPI). This ensures that the fee remains in line with inflation. The fee covers the continued administration and management of the agreement beyond the initial term.

3. Homeowner Responsibilities Costs

Insurance: Throughout the agreement, homeowners are responsible for maintaining comprehensive home insurance on their property. This includes coverage against fire, natural disasters, and other risks typically covered by a comprehensive insurance policy. The insurer must have a financial strength rating of A- or better, ensuring reliable coverage should disaster strike. The cost of this insurance will vary depending on the property's location, value, and other factors, so it's important to budget for this expense. Our guide to problematic areas to insure outlines certain areas of New Zealand where insurers see higher risk and, as such, charge more for policies.
Maintenance and Upkeep: As the homeowner, you must keep the property in good condition. This includes routine maintenance, repairs, and any necessary upgrades to ensure the home remains marketable. While these costs vary widely, they are essential to homeownership and crucial for preserving your property's value.
Rates: You are also responsible for paying all rates, utilities, and other charges associated with the property. These costs can include local council rates, water charges, and other fees, which must be budgeted given a retiree's financial constraints.

Know This: Lifetime Home Offers some Flexibility with the Initial Costs. For example, the establishment fee can be deducted from your first year of income payments. This can ease the immediate financial burden and allow you to start receiving payments without an initial out-of-pocket expense.

Our view is simple: Lifetime Home outlines all costs and fees transparently. There are no hidden charges, and homeowners are fully informed of the financial commitments involved in the agreement from the outset. This clarity helps in planning and budgeting for the long term.

Real-Life Examples of How Lifetime Home Works in Retirement Planning

To illustrate how Lifetime Home can significantly impact retirement planning, let's explore different scenarios using various home values. These examples will highlight how the debt-free equity release model offers financial support without the burden of accruing debt or interest.

Example 1: Modest Home Value

Initial Home Value: $500,000
Equity Released: 35% over 10 years
Annual Income Received: 2.50% of Initial Value, less fees of 0.23%, meaning it will be 2.27% of the initial value.

In this scenario, the homeowner agrees to sell a 35% interest in their $500,000 home. Over ten years, they will receive a steady income stream:

Annual Income: $500,000 x 2.50%, less the 0.23% fee, = $11,350
Fortnightly Payments: Approximately $436
Total Income Over 10 Years: $11,350 x 10 = $113,500
Remaining Ownership After 10 Years: 65% of $500,000 = $325,000

With this steady income, the homeowner can supplement their NZ Superannuation, helping to cover daily living expenses or additional costs like healthcare or travel. After ten years, they retain 65% ownership of their home, ensuring they still hold significant value in their property.

Example 2: Mid-Range Home Value

Initial Home Value: $800,000
Equity Released: 35% over 10 years
Annual Income Received: 2.50% gross of Initial Value, 2.27% after the 0.23% fee.

For an $800,000 home, the homeowner chooses to release 35% equity:

Annual Income: $800,000 x 2.27% = $18,160
Fortnightly Payments: Approximately $698
Total Income Over 10 Years: $$18,160 X 10= $181,600
Remaining Ownership After 10 Years: 65% of $800,000 = $520,000

This option provides a more substantial income, allowing the homeowner to live comfortably, enjoy luxuries, or support family members. After ten years, they retain 65% ownership, which is still a considerable asset.

Example 3: Standard Auckland Home Value

Initial Home Value: $1,200,000
Equity Released: 35% over 10 years
Annual Income Received: 2.50% of Initial Value, less fees of 0.23%, netting to 2.27%

With a home valued at $1,200,000:

Annual Income: $1,200,000 x 2.27% (after fees) = $27,240
Fortnightly Payments: Approximately $1,048
Total Income Over 10 Years: $27,240 X 10 = $272,400
Remaining Ownership After 10 Years: 65% of $1,200,000 = $780,000

A homeowner in this scenario would receive a substantial income, significantly boosting their retirement funds. This could cover major expenses like travel, home renovations, or supporting grandchildren. Despite releasing equity, they retain a significant portion of their home's value.

Our View: Lifetime Home's debt-free equity release offers a flexible and tailored solution for generating retirement income across different home values. In every situation, homeowners maintain a significant share of their property's value while enjoying the financial freedom that comes with regular income. However, it comes at a cost, as outlined below.

Know This: Lifetime offers long-term flexibility without lock-In penalties: While the Lifetime Home agreement is ideally suited for a 10-year timeframe, there’s no lock-in that limits your options if your needs change. Unlike other agreements, there are no exit penalties – if you decide that the arrangement no longer works for you, you can exit without incurring additional costs. This structure arguably provides the best of both worlds: a long-term solution designed for stability, but without restrictive penalties, allowing you to adapt as your life changes.

Moneyhub Founder Christopher Walsh Explains What He Sees as Lifetime Home's Pitfalls

"While Lifetime Home offers an innovative approach to accessing home equity without the burden of accumulating debt, it's not without its pitfalls. As such, it's important to understand some of the more problematic aspects of the Lifetime Home model that anyone considering the product should be fully aware of before making a decision:

1. Lack of Contribution to Household Running Costs

Lifetime Benefits Without Financial Responsibility: One of the most glaring issues with Lifetime Home is that while they own up to 35% of your home, they don't contribute to any household running costs. Whether it's the upkeep of the property, repairs, or even larger expenses like roof replacements or heating system upgrades, the entire financial burden falls on you, the homeowner. In essence, you're responsible for maintaining the full value of the asset, which Lifetime partly owns (e.g. a 35% share), yet they don't contribute any money toward these essential costs.
Maintenance Costs Fall on the Homeowner: Regular maintenance and unexpected repairs are inevitable in homeownership. These expenses can add up quickly, whether it's a leaking roof, faulty plumbing, or the need for a new paint job. While Lifetime benefits from any appreciation in the home's value, they don't share the responsibility of maintaining the property. This means you're investing time, effort, and money into an asset from which you'll only retain a portion of the upside.

2. Significant Reduction in Potential Inheritance

Equity Sale Reduces Estate Value: Selling up to 35% of your home's equity to Lifetime Home means significantly reducing what you can pass on as an inheritance. In a rising property market, this portion could represent a substantial sum loved ones you want to include in your will won't see. If your home value increases substantially, Lifetime Home reaps a considerable portion of that gain. For instance, if your $1,000,000 home appreciates to $1,500,000 after ten years, Lifetime takes 35%, amounting to $525,000, regardless of the initial $227,000 ($250,000 less fees) they paid over ten years.
Shared Appreciation Can Be Costly: While it might seem fair that Lifetime shares in the appreciation, it's crucial to understand the long-term implications. In many cases, homeowners could give away hundreds of thousands of dollars in appreciation to Lifetime, significantly eroding the wealth that could have been passed down to family. This model might leave your children and grandchildren considerably less than anticipated, especially if the New Zealand property market experiences significant growth.

3. Fees That Add Up

Seemingly Small Fees Erode Income: While Lifetime Home's fees are transparent, they add up over time. The establishment fee, annual fees, and post-ten-year fees can significantly eat into the income you receive. For a property valued at $1,000,000, you're looking at a total cost in fees of $28,000 over 15 years. This might seem modest at first glance, but when you're already giving up 35% of your home's value, these additional costs further diminish the financial benefit.
Impact on Net Income: The fees are deducted from the payments you receive, reducing the overall income you get to use. This means the effective income you receive is less than what is initially presented, which can affect your budgeting and financial planning, especially in retirement when every dollar counts.

4. Long-Term Commitment and Lack of Flexibility

Limited Options for Change: While you have the right to live in your home for life, there are restrictions on making changes to the agreement or your living arrangements during the 10-year term. This rigidity can be a disadvantage if you need to adapt to changing circumstances, such as health issues requiring a move to a retirement home or if you wish to release more equity due to unforeseen financial needs.

5. Market Dependency and Risk of Falling Property Values

Shared Risk in Declining Markets: If the property market takes a downturn, you and Lifetime share the risk. While it may seem like a balanced approach, it also means that you might end up selling a large portion of your home's value in a declining market, reducing the overall benefit you gain. In extreme cases, you could find yourself in a situation where your equity has been significantly eroded, limiting your financial flexibility.
Potential Negative Impact on Your Plans: If you plan to use the retained equity in your home for future needs, such as moving to a retirement village or covering long-term nursing home care costs, a declining market could severely impact your ability to fund these expenses. Since Lifetime takes a fixed 35% of the sale proceeds, a drop in property value could leave you with less than expected, potentially jeopardising your plans.

6. Not Suitable for Everyone

Strict Eligibility and Property Type Requirements: Lifetime Home is not available to everyone. The strict eligibility criteria, such as being mortgage-free, aged 70 or over, and owning a specific property type, means that many retired homeowners won't qualify. Additionally, those with unique or complex financial situations may find that Lifetime Home doesn't provide the necessary flexibility.
Need for Comprehensive Understanding: Lifetime Home's model requires a thorough understanding of its terms and implications. The process involves complex legal and financial considerations, which can be overwhelming for some individuals. If you don't understand Lifetime Home, do not proceed any further until you do.

My View on the Pitfalls:

While Lifetime Home offers a debt-free way to unlock home equity, weighing the potential pitfalls against the benefits is essential.
The model's long-term commitment, significant impact on inheritance, and lack of contribution to property costs make it unsuitable for some retirees.
If you are considering Lifetime Home, it's crucial to fully understand the agreement, discuss it with your family, and make sure you understand the legal advice you receive. This decision requires careful consideration of your personal circumstances, future needs, and financial goals.
Lifetime Home might offer a stable income stream, but it's not without its trade-offs. For some, the loss of equity and the associated costs might outweigh the benefits, especially if property values rise or you intend to leave a substantial inheritance.
Before proceeding with such an arrangement, you must consider all aspects, alternatives, and options—the risks and lock-in time are significant".

Christopher Walsh
Moneyhub Founder

Lifetime Home vs a Reverse Mortgage – Cost Comparison for 10-15 Year Terms

Lifetime Home may be innovative in its offerings, but what matters is the overall costs. The examples below provide a clear comparison between Lifetime Home's debt-free equity release and a traditional reverse mortgage, such as those offered bt Heartland Bank, to help explain what you need to know.

Understanding how each option impacts your finances over time is crucial so can compare dollar for dollar both options. To illustrate the differences, we outline two scenarios with varying home values and equity release amounts. These examples highlight the cost structures, the impact on home ownership, and the potential debt accumulation over time.

The table below explains the difference between Lifetime Home and Reverse Mortgages clearly:

Feature	Lifetime Home	Typical Reverse Mortgage
Debt Accumulation	No debt is accumulated; equity is sold upfront for income.	Accumulates debt over time as interest compounds on the loan.
Interest Rates	No interest rates involved.	Interest accrues over the life of the loan, increasing the amount owed.
Income Payments	Provides regular income payments (fortnightly or monthly) based on a percentage of the home's value.	Lump sum or line of credit; no regular income stream.
Ownership Retention	Homeowners retain a percentage of home ownership (e.g., 65% after 10 years).	Homeowner retains full ownership but owes the accumulated loan and interest.
Term Length	Typically 10 years, with the option to extend or explore other options.	No fixed term; the loan is repaid when the homeowner sells the property or passes away.
Flexibility	Homeowners have the right to remain in the home for life, subject to terms.	Allows the homeowner to stay in the home but must repay the loan if they move out or sell.
Eligibility Requirements	Must be 70 or older, mortgage-free, and primary residence only.	Generally available to homeowners aged 60 or older, with different criteria based on the lender.
Repayment	No repayments; Lifetime Home receives its share of the sale price when the home is sold.	Loan is repaid with interest when the home is sold or the homeowner passes away.
Impact on Inheritance	Reduces the percentage of the home available for inheritance (e.g., 35% after 10 years).	Heirs must repay the loan with interest, potentially reducing the estate's value.
Fees and Charges	Includes upfront establishment fee, annual fee, and post-10-year fees.	May include origination fees, closing costs, and ongoing interest.
Impact on Government Benefits	Generally no impact on NZ Superannuation as payments are capital, not income.	May affect eligibility for certain benefits depending on local regulations.
Tax Implications	Payments are not taxable as they are considered capital payments.	Not typically taxed, but interest paid may not be tax-deductible.
Right to Cancel	Offers a 90-day 'cooling off' period to reconsider the agreement.	Some reverse mortgages may offer a right of rescission, usually within a few days of signing.

Comparing Lifetime Home and a Reverse Mortgage

As a recap:

Lifetime Home: As outlined throughout this review, Lifetime Home allows you to release a portion of your home's equity (up to 35%) in exchange for a steady income over 10 years. You retain ownership of 65% of your home after the equity release period (e.g. Lifetime Home takes 10% as a fee for providing the funds over the ten years). We outline the costs involved, including the initial setup and ongoing annual fees, to give you a clear picture of what to expect over a 10- and 15-year period.
Reverse Mortgage: Few people take a single lump sum, so we consider the more common approach of regular drawdowns, where the total amount is released in ten equal annual tranches (for the sake of simplicity). This approach shows how reverse mortgage debt grows over time, even when the loan is distributed gradually. We use a 10% per annum interest rate, compounded daily, to highlight how quickly the debt can accumulate, affecting the total amount owed to the lender.

Why This Comparison Matters:

Long-Term Financial Planning: Lifetime Home and reverse mortgages are long-term financial products. Understanding their cost structures and implications over time is essential for making an informed decision that is sensible financially and also aligns with your retirement goals.
Impact on Home Ownership: It's important to consider how each option affects your ownership stake in your property. Lifetime Home allows you to retain a significant portion of ownership (65%), while reverse mortgages can significantly reduce the equity left in your home due to accumulating debt. The numbers we outline in the examples below show the differences to prepare you for the costs.
Estate Planning: Choosing between these options can impact what you want to leave as an inheritance. Lifetime Home offers a predictable cost structure, while a reverse mortgage can result in a much larger debt burden due to compounding interest.

How to use our two examples:

Check the costs: These examples show the total costs for each option over time. Look at the fees for Lifetime Home and how much debt can grow with a reverse mortgage.
Anticipate your ownership: See how much of your home you'll still own with each choice. This is important for your financial security and planning for the future.
Compare the Pros and Cons: Lifetime Home offers a steady, debt-free income, while reverse mortgages give you more flexibility but can lead to more debt. Use these examples to help decide which is best for you.

Our View: By walking through these detailed scenarios and understanding every cost and benefit, you'll gain a better understanding of how both Lifetime Homes and reverse mortgages work.

We compare the costs and benefits of a Lifetime Home and reverse mortgage over 10 and 15 years.

Lifetime Home: Selling up to 35% equity over 10 years (you retain 65% ownership).
Reverse Mortgage: Instead of a single lump sum, we spread the $250,000 or $150,000 into 10 equal annual tranches over 10 years, each accruing interest separately.

Scenario 1: $1,000,000 Home – Accessing $250,000 (25% of Home Value)

Lifetime Home Costs

Equity Shared: In exchange for a regular income stream, you share up to 35% of your home's equity with Lifetime Home after 10 years. In this scenario, you access $227,000 from your $1,000,000 home (after fees).
Annual Income: You receive $22,700 annually, 2.50% of the home's Initial Value. This is paid out over 10 years, providing a steady income.
Ongoing Fees: There is an annual fee of 0.23% of the Initial Value for the first 10 years ($2,300 per year). After ten years, a fixed fee of $1,000 per year is adjusted for inflation.
Total Fees Over 10 Years: 10 years of annual fees: $2,300 x 10 = $23,000
Fees After 10 Years: Post-10-year fees (5 years): $1,000 x 5 = $5,000 (not adjusting for CPI for simplicity)

Total Cost Over 15 Years:

Total Fees: $28,000
Ownership: Retain 65% ownership after 10 years.
No accumulating debt.

Reverse Mortgage Costs (10% p.a., compounded daily)

The Total Borrowed Amount Spread Over 10 Years is $250,000, divided into 10 tranches ($25,000 each year).
Interest Rate: 10% per annum, compounded daily.

Approximate Calculations for Reverse Mortgage with 10 Tranches - Estimated Outcome
For simplicity, we assume the annual $25,000 drawdown is made on 1 January every year. As such, interest starts compounding thereafter. The costs are as follows:

1. First Year Tranche ($25,000) - Compounded for 10 years at 10% daily:

Approximate multiplier for 10 years daily compounding at 10%: ~2.71
Amount after 10 years: $25,000 * 2.71 = $67,750

2. Second Year Tranche ($25,000) - Compounded for 9 years:

Approximate multiplier for 9 years daily compounding at 10%: ~2.46
Amount after 9 years: $25,000 * 2.46 = $61,500

3. We then include the interest costs from years three to nine

Tenth Year Tranche ($25,000) - Compounded for 1 year:
Approximate multiplier for 1 year daily compounding at 10%: ~1.105

Amount after 1 year: $25,000 * 1.105 = $27,625

Total Cost:

Summing up the growth of all ten tranches over their respective periods provides the total owed after 10 years at a 10% interest rate - around $470,000.
After 15 Years: Considering each tranche grows 5 more years, the total amount owed would be around $800,000.
Exclusions: We have not factored in the additional fees associated with drawdowns, such as a Cash Reserve/Draw Fee charged for each withdrawal from the reverse mortgage facility. These fees, almost always charged by a Reverse Mortgage Lender, would further increase the total amount owed over time. For example, Heartland Bank charges a $70 fee for every withdrawal made, meaning $700 over ten years based on the example above.

Lifetime Home:

Total Cost in Fees:
- Over 10 years: $23,000
- Over 15 years: $28,000
Ownership Retention: Retain 65% ownership of the home after 10 years.
Sale Scenario After 10 Years:
- If the house sells for $1.20 million (net of real estate and legal fees):
  - Lifetime Home's Share (35%): $420,000
  - Homeowner's Share (65%): $780,000

Total Cost of Accessing Funds:
- The homeowner originally accessed $250,000 and retained $780,000 upon sale.
- The total cost for providing the funds, including Lifetime Home's share and fees, would be the difference: $1,200,000 (total value)—$780,000 (homeowner's retained share) = $420,000.
- Adding the total fees over 10 years ($23,000), the total cost is approximately $443,000.

Reverse Mortgage:

Debt Accumulation:
- After 10 years: Owe approximately $470,000
- After 15 years: Owe approximately $800,000
Significant Increase in Debt:
- Total debt increases significantly over time due to daily compounding interest, especially in the latter years as the compounding effect accelerates loan balance growth.

Know This: The key difference between Lifetime Home and a reverse mortgage lies in how costs accumulate over time:

Lifetime Home: Offers a fixed cost structure, with predictable fees and a known equity share, resulting in a total cost of approximately $443,000 over 10 years in this scenario (assuming the home sold for $1.2m net of all selling and legal fees). You retain a significant portion of your home's value (65%) and avoid accruing debt.
Reverse Mortgage: The cost in terms of debt can be significantly higher due to daily compounding interest. By the end of 10 years, you owe around $470,000, nearly doubling the initial amount accessed. Over 15 years, this can swell to $800,000, highlighting the impact of compounding interest on the total debt.

Our View: Lifetime Home provides a more stable and predictable financial solution with a defined cost for accessing equity. In contrast, a reverse mortgage can result in substantial debt accumulation over time, significantly increasing the cost of borrowing due to compounding interest. This makes Lifetime Home a potentially more cost-effective option for those looking to retain more of their home's value while securing a steady income stream.

Scenario 2: $600,000 Home – Accessing $150,000 (25% of Home Value)

Lifetime Home Costs

Equity Shared: In exchange for a regular income stream, you share up to 35% of your home's equity with Lifetime Home after 10 years. In this scenario, you access $150,000 from your $600,000 home.
Annual Income: You receive $15,000 annually, 2.50% (less 0.23% fees, outlined below) of the home's Initial Value. This is paid out over 10 years, providing a steady income. After fees, you receive $13,380, 2.23% of the homes initial value.
Ongoing Fees:
- Annual fee of 0.23% of the Initial Value for the first 10 years ($1,380 per year).
- After ten years, there is a fixed fee of $1,000 per year, adjusted for inflation.
Total Fees Over 10 Years: 10 years of annual fees: $1,380 x 10 = $13,800
Fees After 10 Years: Post-10-year fees (5 years): $1,000 x 5 = $5,000 (not adjusting for CPI for simplicity)

Total Cost Over 15 Years:

Total Fees: $18,800
Ownership: Retain 65% ownership after 10 years.
No accumulating debt.

Reverse Mortgage Costs (10% p.a., compounded daily)

Total Loan Amount Spread Over 10 Years: $150,000 divided into 10 tranches ($15,000 annually).
Interest Rate: 10% per annum, compounded daily.
Amount Owed on Each Tranche After 10 Years:

First Year Tranche ($15,000) - Compounded for 10 years at 10% daily:
• Approximate multiplier for 10 years daily compounding at 10%: ~2.71
• Amount after 10 years: $15,000 * 2.71 = $40,650
Second Year Tranche ($15,000) - Compounded for 9 years:
• Approximate multiplier for 9 years daily compounding at 10%: ~2.46
• Amount after 9 years: $15,000 * 2.46 = $36,900
Further Tranches:
• Compounded for 8 years down to 1 year respectively.
Tenth Year Tranche ($15,000) - Compounded for 1 year:
• Approximate multiplier for 1 year daily compounding at 10%: ~1.105
• Amount after 1 year: $15,000 * 1.105 = $16,575

Total Cost:

Summing up the growth of all ten tranches over their respective periods provides the total owed after 10 years—around $282,000.
After 15 Years: Considering each tranche grows 5 more years, the total amount owed would be around $480,000.
Exclusions: We have not factored in the additional fees associated with drawdowns, such as a Cash Reserve/Redraw Fee charged for each withdrawal from the reverse mortgage facility. These fees, almost always charged by a Reverse Mortgage Lender, would further increase the total amount owed over time. For example, a $70 fee for every withdrawal made would amount to $700 over ten years in this scenario.

Lifetime Home:

Total Cost in Fees:
- Over 10 years: $13,800
- Over 15 years: $18,800
Ownership Retention: Retain 65% ownership of the home after 10 years.
Sale Scenario After 10 Years:
- If the house sells for $720,000 (net of real estate and legal fees):
  - Lifetime Home's Share (35%): $252,000
  - Homeowner's Share (65%): $468,000
Total Cost of Accessing Funds:
- The homeowner originally accessed $150,000 and retains $468,000 upon sale.
- The total cost for providing the funds, including Lifetime Home's share and fees, would be the difference:
  - $720,000 (total value) - $468,000 (homeowner's retained share) = $252,000.
- Adding the total fees over 10 years ($13,800), the total cost is approximately $265,800.

Reverse Mortgage:

Debt Accumulation:
- After 10 years: Owe approximately $282,00
- After 15 years: Owe approximately $480,000
Significant Increase in Debt:
- The total debt increases significantly over time due to daily compounding interest, with a notable acceleration in the latter years as the compounding effect grows the loan balance.

Know This: The key difference between Lifetime Home and a reverse mortgage lies in how costs accumulate over time:

Lifetime Home: Offers a fixed cost structure with predictable fees and a known equity share, resulting in a total cost of approximately $265,800 over 10 years (assuming the home sells for $720,000 net of all selling and legal fees). You retain a significant portion of your home's value (65%) and avoid accruing debt.
Reverse Mortgage: The cost in terms of debt is higher due to daily compounding interest. By the end of 10 years, you owe around $282,000, nearly doubling the initial amount accessed. Over 15 years, this can increase to $480,000, demonstrating the impact of compounding interest on the total debt.

Understanding the Impact of Market Fluctuations: What If House Prices Change?

While the previous scenarios provide a clear comparison of the costs associated with Lifetime Home and a reverse mortgage, they operate under the assumption that the property values remain constant or follow a modest appreciation. However, New Zealand's real estate market has become volatile since 2022; an increasing number of homes are harder to insure, which affects their value, and interest rates are hovering around recent highs. As such, house prices can either jump significantly or drop over time, and when they do, this affects the overall cost vs benefit of Lifetime Home and reverse mortgages.

What If House Prices Increase Significantly?

Lifetime Home:

Positive Outcome: With Lifetime Home, you retain 65% property ownership after 10 years. If the home's market value jumps significantly, this increase directly benefits you because you still own a substantial portion of the home. For example, if the $600,000 home appreciates to $900,000 over 10 years:
Lifetime Home's Share (35%): $315,000
Homeowner's Share (65%): $585,000
Cost of Funds Remains Fixed: Fund access remains predictable and fixed regardless of market appreciation. Your total cost, including fees and the share given up to Lifetime Home, remains similar to the original scenario.
No Extra Debt Accumulation: You benefit from market appreciation without accruing additional debt.

Reverse Mortgage:

Negative Impact Mitigated: If house prices jump, the total amount owed may become less of a burden relative to the increased property value. For instance, if the $600,000 home appreciates to $900,000, and you owe $282,000 after 10 years:
Remaining Equity: $900,000 (market value) - $282,000 (debt) = $618,000
Lender Still Takes a Big Share: Despite market gains, a significant portion of the home's increased value still goes toward repaying the compounded debt, reducing the net benefit of the appreciation.
Costs Still Accumulate: The compounding interest continues to grow the debt regardless of market appreciation, meaning the longer the loan remains, the more it eats into your growing equity.

What If House Prices Drop?

Lifetime Home:

Shared Risk: If house prices fall, the risk is shared between you and Lifetime Home. For example, if the $600,000 home depreciates to $500,000 after 10 years:
Lifetime Home's Share (35%): $175,000
Homeowner's Share (65%): $325,000
Predictable Costs: Despite the drop in value, your costs remain predictable and fixed. You have already locked in the terms with Lifetime Home, so your total cost remains around the original estimate ($265,800), making it less sensitive to market declines.
No Accumulating Debt: With Lifetime Home, you won't face increasing debt burdens. Even in a declining market, you won't have to worry about owing more than the property's worth.

Reverse Mortgage:

Increased Risk: If house prices drop significantly, the amount you owe can exceed the property's value due to the compounding interest. For example, if the $600,000 home depreciates to $500,000, but you owe $282,000 after 10 years, you still have some equity, but if the debt grows to $480,000 after 15 years:
Negative Equity Risk: $500,000 (market value) - $480,000 (debt) = $20,000 remaining equity.
Potential Negative Equity: If the loan continues to grow beyond the property's value, you could potentially end up with negative equity, where the debt owed exceeds the property's value. However, most reverse mortgage providers provide a no negative equity pledge, reducing their mortgage over your property to a maximum of 100% of its value.
Debt Accumulation Continues: The reverse mortgage debt will continue to grow, even in a declining market, putting more pressure on your estate's value.

Our View on Market Fluctuations:

Lifetime Home: Offers a degree of security regardless of market conditions. If house prices increase, you benefit from retaining a substantial portion of the equity, while Lifetime Home also benefits as their 35% share appreciates. This appreciation means that Lifetime Home can make more profit when the property is eventually sold, as their equity stake is now worth more in a stronger market. If prices decrease, you avoid the risk of accruing debt beyond the property's worth, while Lifetime Home shares in the downside. The fixed-cost structure provides stability, making it a safer option in uncertain markets.
Reverse Mortgage: Generally, these are more sensitive to market changes. While rising house prices can lessen some of the compounding debt's impact, falling prices can lead to a situation where the debt outpaces the property's value, especially with compounding interest. This increases the risk equity being reduced to near zero, which is a huge risk. As such, we believe that Reverse Mortgages are ‘safer’ during stable or appreciating markets.

Our Conclusion: Understanding how each option responds to market fluctuations is essential for making an informed decision. Lifetime Home provides more stability and predictability, safeguarding against rising and falling markets. In contrast, a reverse mortgage can be riskier, with the potential for significant debt accumulation, particularly in a declining market. Therefore, Lifetime Home may appeal more to those seeking a balanced approach to accessing their home's equity without being overly exposed to market volatility.

Alternatives to Lifetime Home

While Lifetime Home offers a unique and debt-free way to access home equity, exploring other options that might better suit your personal circumstances and financial goals is important. We list alternatives to consider:

1. Downsizing:

What It Is: Selling your current home and purchasing a smaller, less expensive property.
Pros: This option allows you to free up a significant amount of capital without taking on debt. You retain full ownership of the new property, and any excess funds from the sale can supplement your retirement income.
Cons: Downsizing involves the emotional and physical effort of moving, which might not be desirable for everyone. There can also be costs associated with buying and selling property, such as real estate agent fees, legal fees, and moving expenses.

2. Traditional Reverse Mortgage:

What It Is: A reverse mortgage allows you to borrow against the value of your home, receiving the money as a lump sum, regular payments, or a line of credit. The loan and interest are repaid when you sell the home or pass away.
Pros: Provides flexibility in how you receive the funds and allows you to remain in your home. It can be suitable if you need a large sum of money upfront or prefer a more flexible drawdown approach.
Cons: Interest accumulates on the loan over time, potentially reducing the equity in your home significantly. This option can result in high debt levels and impact the inheritance you leave behind.
Our guide has more information.

3. Renting Out a Portion of Your Home:

What It Is: Renting out a room or a separate portion of your home to generate additional income.

Pros: Generates a steady income stream without selling any equity in your home or taking on debt. You retain full property ownership and the rental income can supplement your retirement funds.
Cons: Being a landlord comes with responsibilities and potential challenges, such as finding suitable tenants, managing the rental space, and complying with local rental regulations. It may also require modifications to your home to make it suitable for renting.

Glossary of Terms

Understanding the terminology used in equity release and reverse mortgage products is essential for making an informed decision. Here's a glossary of key terms to help clarify the concepts discussed in this review:

Equity Release: A way for homeowners to access their property's value (or equity), typically used to supplement income during retirement. This can be done through products like Lifetime Home or traditional reverse mortgages.
Reverse Mortgage: A loan that allows homeowners to borrow against their home's equity. Unlike a traditional mortgage, no regular repayments are required; the loan is repaid when the homeowner sells the home, moves out, or passes away. You can read our dedicated guide here.
Freehold Title means ownership of the property and the land it is on, with no time limit on the ownership period. This is a requirement for Lifetime Home eligibility. Our dedicated guide has more information.
Leasehold Title: Ownership of the property for a specified period, but not the land it is built on. The property is returned to the landowner once the lease expires. Leasehold properties are not eligible for Lifetime Home. Our dedicated guide has more information.
Unit Title: A form of property ownership often associated with apartments or townhouses, where ownership includes a defined part of a building (a unit) and an undivided share of common property. Unit title properties are not eligible for Lifetime Home.
Independent Valuation: An assessment of a property's market value conducted by a qualified, independent valuer. This is used to determine the home's Initial Value for Lifetime Home agreements.
Initial Value: The agreed-upon market value of the home at the start of a Lifetime Home agreement. It is used to calculate the income payments the homeowner will receive.
Compounding Interest: Interest calculated on the initial principal includes all of the accumulated interest from previous periods. This is a key feature of traditional reverse mortgages, which can lead to rapid debt accumulation over time. Our dedicated guide has more information.
Income Stream: Regular payments made to the homeowner in exchange for a share of the home's equity. In the context of Lifetime Home, these payments are typically made fortnightly and are based on a percentage of the home's Initial Value.
Mortgage-Free: A property with no outstanding mortgage or other liens. Being mortgage-free is a requirement for eligibility for Lifetime Home.
Establishment Fee: A one-time fee charged at the start of a Lifetime Home agreement, covering the administrative costs of setting up the agreement.
Shared Appreciation: A feature of Lifetime Home where both the homeowner and Lifetime Home share in any increase (or decrease) in the property's value when it is eventually sold.

Frequently Asked Questions

If my circumstances change, am I locked into the 10-year term?

No, the homeowner can require the whole of the home to be sold at any time. While Lifetime has no obligation to sell our interest in the home to the homeowner, the homeowner can request Lifetime to consider a request.

Can I renovate or modify my home during the agreement with Lifetime Home?

Yes, you can renovate or modify your home during the agreement, but there are conditions. Any significant alterations or renovations must be discussed with and approved by Lifetime Home, as these can affect the property's value. While you can improve your living conditions, it's important to remember that any increase in the home's value due to renovations will also benefit Lifetime Home, as they own a share of the property.

How does Lifetime Home pay my steady, regular income stream? Where does it get its money from?

Initial capital commitments are provided through investments made by to a dedicated Wholesale Fund. 2/4-weekly payments for Lifetime Home are paid by the Wholesale Fund. Careful consideration has been made to manage any unforeseen capital challenges to ensure that the obligations of the agreement will be met.

What if my health deteriorates and I need to move into care?

If you need to move into a care facility for health reasons, you can sell your home and use the proceeds for care expenses. Similar to moving into a retirement village, the sale proceeds will be split based on the agreement. It's advisable to factor in potential health changes when considering Lifetime Home, as the need for additional care may arise unexpectedly.

How does Lifetime Home affect my tax and superannuation?

Currently, the income received from Lifetime Home is not considered taxable as it's classified as a capital payment rather than income. Furthermore, it does not affect your eligibility for NZ Superannuation, which isn't means-tested. This means Lifetime Home will provide regular payments for the term of the agreement.

Can I repay Lifetime Home and regain full property ownership?

Lifetime Home doesn't offer a straightforward option to 'buy back' the portion of your home you've sold. Once the agreement is in place, the 35% (or agreed-upon percentage) equity share is set, and the terms run for the agreed period. If you wish to regain full ownership, Lifetime will "consider" such requests.
All requests for the homeowner to ‘buy back’ their equity will be considered and Lifetime will not act unreasonably or unreasonably withhold consent. If Lifetime agree to the proposal, the property will be re-valued and Lifetime Home's interest in the home would be satisfied by paying Lifetime cash for its interest in the home at its then value.

What happens if my home's value drops significantly during the agreement?

If your home's value drops during the term, you and Lifetime Home share this risk. The impact of a market downturn will mean that both the 35% share for Lifetime Home and your retained 65% will be worth less. However, since the cost of accessing funds is fixed and predictable, you avoid accumulating debt even if the property value decreases, unlike with a reverse mortgage. It's a shared outcome, and Lifetime Home takes this market risk as part of the agreement.

Can my family live in the home if I pass away during the agreement?

If you pass away during the ten-year term, the agreement typically requires that the property is sold, and the proceeds are split according to the agreed-upon equity share. This means your family cannot continue living in the home without settling Lifetime Home's share. However, they will receive the value of your remaining equity share from the sale. Discussing this aspect with your family is important to ensure they understand the implications.

If a partner dies, the same payments will continue for the 10 years. The surviving partner lives in the home for as long as they wish, so long as it is safe to do so, and they meet the ongoing terms of the Agreement.

What if I decide to sell my home before the ten-year term is up?

When the home is sold the homeowner will be required to organise a fair market valuation from an approved valuer and a sale price range is agreed with Lifetime. The Agreement contains a detailed sale process that both the homeowner and Lifetime must follow. If at any time the homeowner wishes to purchase back their equity, Lifetime will consider these requests. As part of our agreed Code of Conduct, Lifetime recognises that circumstances change and will not act unreasonably or unreasonably withhold consent to any matter that requires our approval or consent.

Is the income from Lifetime Home inflation-protected?

The income from Lifetime Home is based on the initial valuation of your property and remains fixed over the ten-year term. This means it's not directly adjusted for inflation, so the payments' purchasing power diminishes over time. It's important to consider this when planning your long-term finances, as you may need to account for rising living costs independently.

How is the property's final value determined at the end of the agreement?

If you sell the property at the end of the ten-year term, its final value is the sales price. The sale proceeds, net of agent fees and legal costs, are then split according to the agreement, with Lifetime Home taking its 35% share and you retaining the remaining 65%. This market-based approach ensures a transparent and fair distribution of the property's value at the time of sale.

What happens if I pass away during the 10-year term? What happens if I have a husband or wife living in the home?

If a homeowner passes away during the Agreement, this will trigger the sale process of the property. Once the property has been sold, Lifetime will be paid for its accrued interest and the remainder of the sale proceeds will be distributed to the estate. If the home is owned jointly, and one homeowner passes away, the surviving partner can live in the home as long as it's safe to do so and as long as they meet the ongoing terms of the Agreement.

Can I use the income from Lifetime Home for any purpose, or are there restrictions?

Your income from Lifetime Home is yours to use as you see fit, with no restrictions. Whether you want to supplement your NZ Superannuation, fund travel, pay for healthcare, or make home improvements, the choice is yours. This flexibility is a key benefit, allowing you to tailor the use of funds to suit your unique needs and lifestyle.

How does Lifetime Home's share of the property affect my ability to leave an inheritance?

While Lifetime Home does take a 35% share of your home's value over time, you still retain 65% ownership after 10 years. This means you can still leave a significant portion of your property as an inheritance. The clarity in ownership percentage can simplify estate planning, but it's crucial to consider how this will affect what you wish to leave behind for your beneficiaries.

What if my property requires significant maintenance or renovations during the term?

You are responsible for all maintenance and renovations during the agreement term. Those costs will fall to you if major repairs or upgrades are needed. It's important to factor these potential expenses into your financial planning, especially if your property is older or requires frequent upkeep. Remember, Lifetime Home benefits from any increase in property value due to your improvements without contributing to these costs.

Can I refinance my home or take out a new mortgage during the Lifetime Home agreement?

No, you cannot take out a new mortgage or refinance your home once you enter a Lifetime Home agreement. The property must remain mortgage-free for the duration of the agreement, which limits your financial flexibility regarding the property.

How does Lifetime Home handle situations where the property value decreases significantly?

If the property value decreases, the risk is shared between you and Lifetime Home. Your share and Lifetime's share will both be affected proportionally. For instance, if the property's value drops, the dollar amount you and Lifetime Home can claim upon sale will reduce. While this risk-sharing can be seen as a benefit, it's important to understand that Lifetime Home is not a guarantee against market downturns; it merely shares in the impact.

Can I improve my home to increase its value?

Yes, you can make improvements to your home during the agreement term. However, Lifetime Home will not contribute to the costs of these improvements, even though they will benefit from any increase in the property's value when it's sold. This means you will be investing your funds to increase the home's value, a portion of which will go to Lifetime Home when the property is sold.

If I extend the agreement after 10 years, how is the new equity release amount determined?

If you extend the agreement after the initial 10-year period, Lifetime Home may allow you to release further equity, but this amount will not exceed 50% of the home's current value. A new independent valuation will be conducted to determine the property's current value, and any additional income will be based on this updated valuation. This provides some flexibility, but it also means reassessing your needs and the value of your home at that point.

What happens if I need to move into a retirement village or long-term care?

In the event that the homeowner moves into a retirement village or long-term care, this would trigger a requirement for the property to be sold. A sales process will apply, which Lifetime will work through with the client. Once the property is sold, Lifetime will be paid for its accrued interest and the remainder of the sales proceeds will go to the homeowner.

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