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Reverse Mortgages - The Definitive New Zealand Guide

Our guide to reverse mortgages (also known as a home equity release) looks at the costs, benefits and disadvantages associated with such mortgages.
Updated 3 August 2026
Summary of Reverse Mortgages
  • Reverse mortgages are also known as retirement equity release loans. They provide cash-up-front, with no repayment needed until you sell your home, move to a rest home or pass away.
  • It's a common problem: you retire and have a mortgage-free house, but the New Zealand superannuation and personal savings don't cover the purchases you want to make. Reverse mortgages are pitched to retirees as loans that offer 'a better retirement' and 'guarantee you can unlock equity in your home while not having to sell it'.
  • Applicants of reverse mortgages usually use the money for items such as home repairs, a car, an overseas trip to see family, debt consolidation or monthly income support
  • Reverse mortgages can be a good option for those who are older, who wish to remain in their own homes, and have consulted with an independent financial adviser and their family. Annual interest rates fluctuate, usually around 7.5 to 10% per annum, and interest compounds monthly. It is like taking out a loan and not paying it back for a time period that could be a decade or more.
  • If you change your mind later on and want to repay the reverse mortgage loan, as long as the interest rate is floating, the fees for doing this should be minimal or zero. Heartland Bank, for example, only offers a floating rate for reverse mortgages, and there are no penalties for early repayment.  
  • How expensive are reverse mortgages? Data from Heartland Bank shows the average age of Heartland Bank reverse mortgage holders is 73 years, who start out by borrowing an average of 8.5 per cent of their house value, and repay their loans in full after 6.07 years. This means for those who borrow the average initial amount of $82,000 at 8 per cent, the repayment amount after six years would be around $133,000. Many loans run for longer, and every extra year compounds the debt - be aware of what the compounding debt costs will look like upfront. 
  • Trusted personal finance authority Mary Holm talks about the opportunities of Reverse Mortgages in a NZ Herald column as published in March 2026 [link here: Should my mum sell her house to the neighbours or take a reverse mortgage? – Mary Holm - NZ Herald] that is well worth reading. Here is another recent article by well-known consumer finance journalist Susan Edmunds Reverse mortgage or retirement village: Which will give you the retirement you want? | RNZ News

Our guide to reverse mortgages outlines everything you need to know about this unique mortgage product. We cover:
Know This: Reverse mortgages are widely used, but are they the best option? Many retirees worry about compounding debt and the impact on home equity.
  • Our guide to Reverse Mortgages, brought to you by Lifetime Home, explains the full picture. Lifetime Home offers an alternative approach to equity release - one that avoids accumulating debt and gives retirees financial security without taking out a loan.
  • Unlike a reverse mortgage, Lifetime Home provides a steady income stream in exchange for a fixed percentage of your home's value, ensuring financial stability without the risk of compounding interest.
  • If you're considering accessing your home equity in retirement, comparing all options is crucial. Learn more in our in-depth Lifetime Home review or visit their website.
  • Important: MoneyHub presents Lifetime Home as an alternative to reverse mortgages and other retirement funding options, but this is not an endorsement or a recommendation. We encourage all readers to compare financial products carefully, seek independent advice, and fully understand the terms before making any decisions.
​Try the Lifetime Home Income Projection Tool
Do you want to see how much regular income your mortgage-free home could give you in retirement?
With NZ Super included (at 2025-2026 rates), the total comes up to:
  • Single person: $1,949 per fortnight
  • Couple: $2,529 per fortnight

This tool gives an instant projection and doesn't require your details. Try the Lifetime Home Income Projection Calculator

Know How Much You Can Borrow

For Heartland and SBS the amount you can borrow is based on your age. The younger you are, the less the lending percentage. For example, Heartland has the formula (youngest borrower’s age less 40). So, a 65-year-old has a lending percentage of 25%. The maximum Heartland lending percentage is 50% for a 90-year-old. This is because the chances of you passing away increases, so the risk for the bank of not being repaid from the sale of your house is lower. 
​
A Reverse mortgage can be accessed in various ways:
  • Initial drawdown – where you elect the amount needed to cover the immediate needs and costs of the facility
  • Regular monthly payment – if elected then a regular amount is paid monthly into your bank account to assist meet regular cost of living expenses.
  • Cash reserve facility enables funds to be drawn as needed in the future for emergencies or other purposes, subject to an approved limit.
     
How is the 'value' of my home calculated?
Heartland uses the IVAL (online valuation model). The cost of this is $17.14 to the client and can be used in most cases. If in rare circumstances a Registered Valuation is required, then the cost will be quoted by a Registered Valuer based on property type and location. This can range from $600 to $1,000 plus. The valuation fee is deducted from the initial loan amount. 

How does my age affect how much I can borrow?
Heartland Bank states quite clearly that "your maximum loan entitlement can be estimated by multiplying the value of your home by a percentage (calculated as the age of the youngest borrower on your loan minus 40)".

For example: If you have a $500,000 home and the youngest borrower is 70 years old, then $500,000 X 30% = $150,000.
The following table illustrates examples of this percentage at various ages based on this rule, although for other lenders it may vary slightly:
Age of Youngest Borrower
60
65
70
75
80
85
90
Maximum % of Home’s Value Available
20%
25%
30%
35%
40%
45%
50%
As the table shows, the older you are, the more you can borrow as a percentage of the home's value. Keep in mind that the value of your home does not include its contents. Lenders will only loan based on the home value, which is made up of land and building only.

Advantages of Reverse Mortgages

Reverse mortgages have a number of benefits, which we outline in no particular order below:
  1.  Your approved limit can be allocated to nearly any purpose you choose. But note there are checks on purpose.
  2. The money you receive does not need to be repaid until your home is sold.
  3. If house prices are increasing, this reduces overall loss in equity. For example, if you draw down $50,000 at an 8% interest rate over 10 years, and house prices go up an average of 6% per year over the same 10 years, appreciation softens the equity hit but does not reduce the 8% cost of the debt.
  4. Depending on your age, you can draw down from 20% to 50% of your home's current value (dependent on your age) either all at once or in smaller sums as you need the money.
  5. Some lenders guarantee you will never owe more than the net sale proceeds of your home and you can keep your home for as long as you choose, subject to complying with the terms and conditions. There is no time limit (for example ten years) during which to take advantage of reverse mortgages.
  6. Reverse mortgages may be a good option for those who wish to remain in their own home, and who have consulted with a lawyer and their family.

Disadvantages of Reverse Mortgages

Reverse mortgages are not without their risks, costs and drawbacks, which we outline below:
  1. When you vacate the property permanently you or the estate will have 12 months to arrange for the repayment of the Reverse Mortgage. If you leave the property for an extended period, the terms of Reverse Mortgage conditions will need to be checked, especially if renting or leasing your property to others during this time.
  2. Lenders charge higher-than-standard mortgage interest rates on reverse mortgages – generally it is a floating rate 2% to 2.5% p.a. above standard bank floating rates.
  3. Because you don't usually make any repayments and interest compounds monthly, Heartland’s data shows the average loan of $82,000, repaid after the average period of 6.07 years, can increase to $133,000. The longer you have the loan, the more you or your estate will owe. This can have implications if you need to move out of your home later and pay for residential care. You should be provided with total repayment projections when you apply for a loan.
  4. There are a range of fees charged that apply. For the initial drawdown, the application fee and valuation fee will be deducted from the drawdown. If you elect for a regular payment to be made to your bank account monthly there will be a fee (for example, Heartland charges a one-time set up fee of $120). If you use the Cash Reserve and draw funds as you need them then the fee of $70 for each drawdown will be charged.) At the beginning you will also need to engage a solicitor to receive the documents and to go over the disclosures in respect of the documents. This cost also needs to be factored in and is agreed with your solicitor.
  5. As with any home loan, you need to follow the rules of the reverse mortgage contract - this means you have to keep up with home insurance payments, pay council rates and look after it in accordance with the lender's guidelines.
  6. Lenders are reluctant to offer reverse mortgages on some properties - examples are farms, homes with a leaky building history, retirement villages and homes with troublesome monolithic plaster cladding systems.  
Know This: Reverse mortgages are widely used, but are they the best option? Many retirees worry about compounding debt and the impact on home equity.
  • Our guide to Reverse Mortgages, brought to you by Lifetime Home, explains the full picture. Lifetime Home offers an alternative approach to equity release - one that avoids accumulating debt and gives retirees financial security without taking out a loan.
  • Unlike a reverse mortgage, Lifetime Home provides a steady income stream in exchange for a fixed percentage of your home's value, ensuring financial stability without the risk of compounding interest.
  • If you're considering accessing your home equity in retirement, comparing all options is crucial. Learn more in our in-depth Lifetime Home review or visit their website.
  • Important: MoneyHub presents Lifetime Home as an alternative to reverse mortgages and other retirement funding options, but this is not an endorsement or a recommendation. We encourage all readers to compare financial products carefully, seek independent advice, and fully understand the terms before making any decisions.

8 Must-Know Facts about Reverse Mortgages

Reverse mortgages are complex and should only be entered into with a full and complete understanding of your obligations as a borrower. We have outlined 8 key must-know facts below to help you navigate the mechanics and fine print.

The interest rate compounds monthly, and because you don't make repayments, the balance you owe will rise, with its speed depending on how much you borrow.

Reverse mortgages are not like standard residential mortgages. You are being advanced a sum of money, and the bank does not receive any repayment until you pass away or decide to sell your home. Although Heartland data reflects that an average loan may be paid back within 6.07 years, in other cases a bank can wait for 10, 20 or even 30+ years before being repaid. In this time, any money you have borrowed will incur interest. It's a higher interest rate than residential mortgages are offered and, as with a standard home loan it usually compounds monthly. Because you don't make any repayments, your debt can balloon. 
​
Once you borrow, the clock starts ticking on the interest expenses. As an average example:
1.    If you were 75 and made an initial $85,000 drawdown on your home worth $1m, to help you to pay for your immediate needs. This may include a car, home maintenance, health care costs and travel while remaining in your own home as long as you wish.
2.    If you move to a rest home at 90 the lender will claim back $281,000 (average interest rate of 8% p.a.)
3.    The $85,000 drawdown leads to a claim on your property that may affect your choices, so the risks need to be properly understood. 

In the table below, we show how much debt a $100,000 loan (with a 8% p.a. interest rate) can create where no voluntary repayments are made. 
Age of Borrower
Amount Owed at 80 Years of Age
Amount Owed at 85 Years of Age
Amount Owed at 90 Years of Age
60
$492,680
$734,018
$1,093,573
65
$330,692
$492,680
$734,018
70
$221,964
$445,391
$492,680
75
$148,985
$221,964
$330,692
80
N/A
$148,985
$221,964

Be economical with what you borrow - i.e. if you only need $25,000, don't ask for $100,000

The Reverse Mortgage limit approved can be drawn as you need it. 
Because of the high (and compounding) interest rate, a reverse mortgage can be expensive. For this reason, you should only draw down exactly what you need, and nothing else. For example, if you have a quote for $20,000 for home renovations, this is the amount you should draw down. Anything more than that is unnecessary and leads to excessive interest costs. You will probably pay a one-off fee per drawdown, but this will almost certainly be cheaper than leaving money in the bank that you don't need. If you apply to draw down $100,000 in total over the course of your retirement, taking it in portions as you need it is a very popular (and cost-effective method) to keep the borrowing costs under control.

Reverse mortgages by definition are a debt, and the debt has first dibs on your estate

As soon as you draw down on a reverse mortgage, you create a debt. And unlike debts that banks usually offer, reverse mortgages do not get repaid until you pass away or sell your home. To be clear - you are not repaying it monthly or weekly. Because of the interest rates and effect of compounding interest which charges you interest on the interest previously incurred, any inheritance you plan to leave will be reduced by the amount of the reverse mortgage debt owed. While your house may have gone up in value every year, it's unlikely to outpace a reverse mortgage interest rate. 

An average example:
  • Paul and Toni own a house worth $800,000 in Auckland. They borrow $85,000 at age 60 to spend on house renovations. 
  • At age 85, they both pass away. Their home has increased at 3% per annum over the 25 years and is now worth $1,675,000. 
  • The reverse mortgage debt has grown to $624,000 over the same period (applying an interest rate of 8% p.a) 
  • The estate of Paul and Toni receive $1,051,000 from the proceeds of the house sale ($1,675,000 sale price, less $624,000 reverse mortgage debt). We have excluded real estate agent fees, which will also reduce the proceeds.
  • The amount received by the estate is a combination of house price increase less the cost of debt and interest over 25 years.  Interest compounds over time and in the absence of voluntary repayments to reduce the overall balance the remaining equity to the estate/beneficiaries is subject to market fluctuations in both the property market and the interest rate market.

There ARE alternatives to reverse mortgages

A reverse mortgage is by no means the only option to get cash from your property; five popular alternatives might work for your needs:
  1. Downsize, and do it early. This frees up a lot of equity in your home, i.e. selling a four-bedroom for $800,000 and moving into a two-bedroom for $500,000 gives you $300,000 of available funds. And if you do plan to downsize, it makes sense to do it sooner rather than later. As you get older, it gets harder, and the likelihood you will do it decreases. While it may be overwhelming sorting out a lifetime of possessions as part of the process, invariably someone needs to do it. If you downsize early, you have more time to wait for the right offer for your existing home and house hunt for your next.
  2. Sell your home to your children. This gives you cash upfront or a steady income, and keeps your home in your family. Usually, this works by retirees receiving either the full value of the property upfront, or monthly payments which transfer more and more ownership as time goes on. Such arrangements need to be carefully planned with legal advice, as there have been cases throughout New Zealand where things have gone wrong, usually leaving the parents in a vulnerable position and often without a home.
  3. Consider a retirement home. Retirement homes are increasingly popular and offer a discounted property given the fact you never own the land. You will also pay a fixed ongoing weekly fee, have no repairs and maintenance costs, and you have the right to live there until you pass away or move out. But, retirement homes are not without their risks either, as our guide explains.  
  4. Consider renting out property within your home. Many homeowners don't want to move but are open to the idea of altering their home to create a self-contained flat which can be rented out. This has an upfront cost but does provide ongoing rental income (and the usual hassles of being a landlord). 
  5. Sub-divide any spare land your own: This is a possibility if you have a big section and would be comfortable with someone buying a portion of it and building a house. You will receive money upfront but also have the inconvenience of living beside a building site in the short term. It also drops the value of your property after the sale of the spare land.
  6. Lifetime Home: Lifetime Home is a structured alternative to a reverse mortgage that allows you to unlock the value of your property while retaining the right to live in it. Unlike a reverse mortgage, which accrues interest over time and reduces your estate’s value, Lifetime Home involves selling a share of your home’s future sale price in exchange for an upfront lump sum. This means you get access to cash without taking on debt or making repayments, and your remaining share of the home continues to appreciate if property values rise. Our review explains more.

If you sign up for a reversed mortgage, make sure your contract includes FOUR essential terms and conditions

  • Firstly, if you are a couple, it is essential for BOTH of your names to be on the mortgage contract. This means that if one of you passes away or moves into care, your home will continue to be in the possession of the other person. 
  • Secondly, make sure the mortgage contract allows for 'lifetime occupancy'. This means that the bank cannot sell it for any reason other than your death or your need to permanently move out. 
  • Thirdly, make sure the contract prohibits 'negative equity'. This means if you borrow, for example, $100,000, and later on the amount owed is $300,000 but your home is only worth $250,000, your estate will not have to pay any more money other than the proceeds from the sale of the home. Without this clause, the bank will have a right to any bank accounts, investments, vehicles and all other property of value before any beneficiary, i.e. those in the will. 
  • Lastly, make sure the contract has a 'loan repayment guarantee' which means you never have to make any repayments until either you pass away or sell your home. For example, once you draw down the money you need, you never have to pay it back while you live in your home.

Besides the interest rate, reverse mortgages come with a lot of fees

Your lender usually applies different fees before, during and at completion of the reverse mortgage. In our example below, we've outlined the fees charged by Heartland Bank.
Initial fees:
  • Initial fees: 
    • Valuation Fee of your home:  IVAL $17.14 or in rare situations a Registered Valuation is needed then $600 plus depending on quote from valuer for location and type of property. This fee can be deducted from your initial drawdown.  
    • Initial Arrangement Fee: $920 (this is charged on the initial settlement date of your loan) and is deducted from your drawdown. 
    • Regular Monthly Payment set up fee if selected $120
    • Cash Reserve drawdown ongoing is $70 per drawdown.
  • Application fee to apply for increased limit.  
    New Application Fee: $455 - this is charged if you want to increase the lending limit on your existing Reverse Mortgage – it is a new Application, and on the settlement date of a further advance the fee is deducted from the new advance. 
End of mortgage fee:
  • Mortgage Discharge Fee: $270 - this is charged at the time your loan is fully repaid (i.e. from the proceeds of the sale of your home). This fee is added to the loan balance of your loan and will form part of the total repayment required.

Other fees that may apply depending on your circumstances - you can download the Heartland fee PDF here.

Please note that individual lender terms, conditions and fees vary - we have used Heartland Bank as an example given its dominant position in the New Zealand reverse mortgage market.

A reverse mortgage has a FLOATING (i.e. variable) interest rate, which may jump later on

Reverse mortgages do not offer fixed interest rates given the length of the borrowing. If the Reserve Bank increases its cash-rate and mortgage interest rates increase overall, so will your reverse mortgage interest rate. 9.50% could easily become 11% or even 12%, meaning a $100,000 loan borrowed over 20 years could cost a whopping $893,502 and $1,089,255 respectively. Even if you have a guarantee of 'no negative equity', if you do need to sell your home later on, you would need to settle a big debt first.

Reverse mortgages can be dangerous if your circumstances change later on

If you need to sell your home later on to buy a retirement home or rest home care, reverse mortgages can erode the equity in your house. Our example explains this best:
  • Rod and Barbara take out a $100,000 reverse mortgage at age 65, paying an average rate of interest of 8% per year, with a house valued at $500,000.
  • At age 80, they decide to sell their home and buy a retirement home for $350,000.
  • By this time, their house can sell for $650,000.
  • But, in the 15 years since they received the $100,000 reverse mortgage, the loan balance is now around $330,692, and this must be repaid to the bank when their house sells.
  • Once the bank is repaid, they are left with equity of around $319,000. Given the retirement home is $350,000, they have a $31,000 shortfall and will be unable to move.
    ​
This outlines the risk of taking a reverse mortgage - it limits your options later on should your circumstances change. If you need to sell your home to pay for rest home care, you may not have enough to last more than a couple of years.

Know This: Reverse mortgages are widely used, but are they the best option? Many retirees worry about compounding debt and the impact on home equity.
  • Our guide to Reverse Mortgages, brought to you by Lifetime Home, explains the full picture. Lifetime Home offers an alternative approach to equity release - one that avoids accumulating debt and gives retirees financial security without taking out a loan.
  • Unlike a reverse mortgage, Lifetime Home provides a steady income stream in exchange for a fixed percentage of your home's value, ensuring financial stability without the risk of compounding interest.
  • If you're considering accessing your home equity in retirement, comparing all options is crucial. Learn more in our in-depth Lifetime Home review or visit their website.
  • Important: MoneyHub presents Lifetime Home as an alternative to reverse mortgages and other retirement funding options, but this is not an endorsement or a recommendation. We encourage all readers to compare financial products carefully, seek independent advice, and fully understand the terms before making any decisions.

Reverse Mortgage Providers - Heartland Bank vs SBS Bank

The market is rather small, and two providers dominate the market. Presently, Heartland Bank  and SBS Bank (sold as a 'retirement loan') are the primary reverse mortgage lenders.

Heartland Bank Reverse Mortgage

SBS Bank Reverse Mortgage

Reverse Mortgage Frequently Asked Questions

What banks and lenders offer reverse mortgages?

As explained above, only two providers dominate the market; Heartland Bank (through its Seniors Finance division) and SBS Bank (sold as a 'retirement loan') are the primary reverse mortgage lenders.

Are any types of homes excluded from reverse mortgages?

 We confirmed directly with Heartland Bank and the key criteria is that the house is sound and in good condition. Virtually all locations are considered except remote West Coast locations. Monolithic plaster or leaky homes are reviewed separately prior to providing any Reverse Mortgage limit. Properties with land area in excess of 10ha are also separately reviewed. Properties will also need to be valued at least $250,000.

Can I draw down a reverse mortgage weekly or monthly as a way to supplement income?

Yes. As an example, Heartland Bank offers monthly advances as part of its service. You can then advance an agreed amount sum of money every month for as long as you like.

Are all reverse mortgages the same?

No, but in our review we found very little difference by way of borrowing limits, interest rates and fees. If you decide to go ahead with a reverse mortgage, contacting ALL the lenders for their best offer is the ideal way to get the best deal.

How much interest do you pay on a reverse mortgage?

It varies by lender; generally it's between 7.00% and 9.50% per annum, but it's not unreasonable to see it move higher if the OCR continues to increase.

Does a reverse mortgage affect NZ superannuation payments?

No, whatever you draw down by way of a reverse mortgage is your money to spend as you like it. Your NZ superannuation will continue to be paid until you pass away.

Is a reverse mortgage a ripoff?

Floating rate interest costs are loosely aligned with main bank floating rates and OCR movements. The reverse mortgage is not for everyone and provides access to cash resources where the only other alternative is to sell the property. Careful consideration of your choices at each stage is crucial. Seeking independent legal and financial advice and talking with family to understand the reasons and the overall impact will reduce any surprises. ​

Can you get a reverse mortgage if you owe money on your home?

Yes – refinancing existing mortgages is a common use of the Reverse Mortgage to reduce the need for ongoing monthly repayments. It allows time to consider options without the financial pressure on cash flow to meet repayments on the standard mortgage or other loans.  The loans are repaid from the first drawdown of the Reverse Mortgage. 

Are there any safe reverse mortgages?

It is up to how much you draw down and how often you do it, which ultimately determines how 'safe' a reverse mortgage is. If you withdraw $100,000 on the day you retire but take 5 or 10 years to spend it, the interest costs will be significant. For this reason, savvy reverse mortgage customers draw down money from their lender only when they need it. For further safety, ensure the FOUR protections are in place in your contract - life occupancy, no repayments, both names on the contract and no negative equity.

Are there application fees and termination fees on a reverse mortgage?

Yes - these vary but between lenders but application fees can be as high as $920 The fee is added to the total loan balance and repaid by the house sale proceeds.

What is the best reverse mortgage?

It depends on the terms being offered. Generally, the most attractive deal is one with:
  1. The lowest interest rate
  2. The lowest fees
  3. The best terms, such as life occupancy, no repayments and no negative equity, among others.

Can you lose your house with a reverse mortgage?

No - provided you comply with loan terms and conditions, and ensure that your contract includes the FOUR essential terms and conditions - life occupancy, no repayments, both names on the contract and no negative equity. As long as you continue to live in it, the lender cannot force the sale of your home, even if your debt exceeds the current value of the home, while you continue to comply with loan terms and conditions.

What happens to a reverse mortgage when you die or move permanently into care?

When you pass away, your lender has the priority security over the house and will organise for it to be sold. The net proceeds will be paid to your estate and distributed to your beneficiaries in accordance with your will. 

If you move into care, you will need to arrange for the sale of your home. Again, the bank will be repaid their debt as a priority. The amount left is yours to keep and spend how you will. For example, if your home sells for $600,000 and the bank is owed $200,000, you will receive $400,000.

How much equity do you have to have to qualify for a reverse mortgage?

The house value will determine this along with any existing mortgage on the property. Provided the home meets lending criteria then you will be able to obtain a Reverse Mortgage based on the age-based lending limit. If you have an existing mortgage on the property, then your lending limit from the Reverse Mortgage will need to be in excess of the amount to be repaid on the existing mortgage.

Can I rent out a room if I have a reverse mortgage?

 Yes you can rent out rooms but if vacating the property to rent on a longer-term basis you need to check with your Reverse Mortgage provider and the terms of your mortgage contract.

Can you get a reverse mortgage at age 55 or 60?

Generally, the earliest you can draw down on a reverse mortgage is when you or your partner are at least 60 years of age.

Is there an age limit on reverse mortgages?

No – the only restriction is if aged over 90 the lending percentage will remain at a maximum of 50%. 

Does a reverse mortgage pay a lump sum?

It can, or you can take gradual payments. Bear in mind that each drawdown you make may be charged a one-off processing fee.

Do you have to pay taxes on a reverse mortgage?

No - because you are being loaned the money, there is no income tax on whatever you draw down from your lender.

Can you make monthly payments on a reverse mortgage?

Yes - some lenders allow you to make repayments on your loan at any time, as well as fully repaying your loan. Check to see if there are early repayment charges with your loan, however with the floating rate interest it is rare for there to be additional charges. You will need to repay the Mortgage Discharge Fee if you do repay your loan in full.

Do you pay interest on a reverse mortgage?

Yes. Interest is calculated monthly and added on to your loan balance. The interest then compounds, meaning your loan balance increases faster because you don't make any repayments and interest is charged on the previous periods' interest. The usual interest rate for a reverse mortgage is around 8% p.a.

Reverse Mortgages: Our Conclusion

  • We believe reverse mortgages should be a 'well-considered option' given the long-term borrowing costs involved. We are also cautious about the various fees charged, which make this kind of financing very expensive. While retirement can be expensive (our retirement calculator gives you an idea), there are alternatives to reverse mortgages.
  • If your circumstances change later on, a reverse mortgage can lower the equity in your house, leaving you in a poor financial position should you need to move home or go into care.
  • Be aware that the floating interest rate right now of around 7.5% has room to increase, meaning even if you borrow now, you may see the interest rate change to 10%, or even higher later on.
  • Right now, few lenders offer reverse mortgages - Heartland Bank and SBS Bank dominate the market. As mentioned above, alternatives to taking out a reverse mortgage do exist and should be explored fully. 
  • If you do proceed with a reverse mortgage, make sure the terms are in your favour (i.e. no negative equity, the property can't be sold by the bank in your lifetime, no repayments in your lifetime and having both partners named are all essential). 
  • It's best to talk to a mortgage broker and lawyer about reverse mortgages, as well as your family, given the risks involved. ​
Know This: Reverse mortgages are widely used, but are they the best option? Many retirees worry about compounding debt and the impact on home equity.
  • Our guide to Reverse Mortgages, brought to you by Lifetime Home, explains the full picture. Lifetime Home offers an alternative approach to equity release - one that avoids accumulating debt and gives retirees financial security without taking out a loan.
  • Unlike a reverse mortgage, Lifetime Home provides a steady income stream in exchange for a fixed percentage of your home's value, ensuring financial stability without the risk of compounding interest.
  • If you're considering accessing your home equity in retirement, comparing all options is crucial. Learn more in our in-depth Lifetime Home review or visit their website.
  • Important: MoneyHub presents Lifetime Home as an alternative to reverse mortgages and other retirement funding options, but this is not an endorsement or a recommendation. We encourage all readers to compare financial products carefully, seek independent advice, and fully understand the terms before making any decisions.
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