Reverse Mortgages
Empowering Your Golden Years — With Advice You Can Trust
A reverse mortgage can fund a more comfortable retirement — but it's a significant decision that affects your equity, your estate and your family. This guide explains, in plain English, how reverse mortgages work, the protections to insist on, and the alternatives worth considering first.
How a Reverse Mortgage Works
Borrow against the value of your home — but make sure you understand how the loan grows before you commit.
A reverse mortgage (also called home equity release) lets homeowners — generally aged 60 or over — borrow against the equity in their home while continuing to own it and live in it. You can take the money as a lump sum, as regular payments, or as a facility you draw on when needed.
The key difference from a normal mortgage: you make no regular repayments. Instead, interest is added to the loan and compounds over time. The loan — plus all the accumulated interest — is repaid when you sell the home, move into long-term care, or pass away. Reverse mortgages are on floating interest rates, typically higher than standard home loan rates, so the balance grows faster than most people expect.
Potential Benefits
You can spend the money on anything. No regular repayments are required. You remain living in — and owning — your home. Taken as a drawdown facility, interest compounds only on what you've actually used. It can provide real financial flexibility in retirement.
Risks and Drawbacks
Compounding interest can significantly reduce your equity over time — the balance can roughly double in a decade at typical rates. You cannot rent out or sell your home without repaying the loan. Establishment, valuation and legal fees add to the cost. And it may substantially reduce what you can leave to your family.
The Protections to Insist On
Reputable New Zealand lenders offer important protections. Before you sign, make sure your loan includes all of these — we check every one of them in the actual loan documents.
You — or your estate — will never have to repay more than your home sells for, even if the loan balance grows beyond the home's value. The lender cannot claim your other assets, such as savings or investments. This guarantee is standard with reputable New Zealand reverse mortgage lenders, but it must be in the loan documents, not just the brochure.
This is the right to live in your home for as long as you choose. Take care: the guarantee protects only the people named on the loan agreement. If a spouse, partner or family member living with you isn't named, their right to stay if you die or move into care needs to be addressed before you sign — this is one of the most important things we check.
Some lenders let you ring-fence a percentage of your home's value so it is preserved for your estate no matter how large the loan balance grows. If leaving something to your family matters to you, ask about this option before you sign.
Your lender should belong to an independent dispute resolution scheme, such as the Banking Ombudsman scheme, so you have somewhere to go if anything goes wrong during the life of the loan.
Under the loan you must keep the home insured and maintained and pay the rates. We explain exactly what's required and what happens if these obligations aren't met, so there are no surprises later.
Think Carefully — and Consider the Alternatives First
A reverse mortgage is the right tool for some people and the wrong one for others. There's no pressure from us either way.
Alternatives worth considering
Before committing to a reverse mortgage, consider whether another option might suit your situation better:
• Downsizing to a smaller property — our guide to deciding whether to sell your property works through this decision.
• Renting out part of your home for ongoing income.
• Forming a trust with your children as trustees (and guarantors to enable bank borrowing) — a structure we can advise on and establish for you.
• Rates relief — ask your council about rates postponement and rebates for older homeowners.
• Financial help from family, properly documented so everyone is protected.
Talk to your family — and get financial advice too
A reverse mortgage directly affects what you leave behind, so an open conversation with your family now prevents painful surprises later. And because the loan interacts with your wider retirement planning and future care arrangements, we recommend independent financial advice alongside our legal advice — they answer different questions, and for a decision this significant you deserve both.
The current reverse mortgage lenders in New Zealand are Heartland Bank and SBS Bank. Whichever lender you choose, the independent legal advice they require is where we come in.
The Independent Legal Advice You Must Receive — and How We Help
New Zealand reverse mortgage lenders require you to receive independent legal advice before the loan is finalised — and for good reason. This is exactly the advice we provide.
We explain the loan
How it works, how the interest compounds, and what it means for your equity over time — in plain English, not bank language.
We check the protections
The no negative equity, lifetime occupancy and any equity protection provisions — in the actual loan documents, not just the brochure.
We check who's named
Everyone who should be on the loan is on it, so no one's right to stay in the home is at risk.
We handle the legal work
Certifying the documents, registering the mortgage, and discharging any existing mortgage being repaid from the loan.
Our advice is independent — we act for you, not the lender
If something in the documents isn't right for your situation, we'll tell you plainly before you sign. Call +64 9 415 0099 or email reception@rossholmes.co.nz — we're here to help by phone, Zoom or in person. For our wider mortgage services, see Mortgages & Borrowing.
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This page is general information, not legal advice for your specific situation. Lender products and protections differ — please contact us to discuss yours.