Before any client of mine signs a reverse mortgage, we go through this list. A fair share of them end up using something on it instead, and the lender never hears from them. That is the right outcome when it happens, and this page exists so you can run the same check yourself.
Downsizing Or Moving To A Cheaper Area
The option that releases the most money, with no interest attached. Selling a $1.2 million home and buying for $800,000 can put $340,000 or so in the bank after selling costs, which no reverse mortgage at any age will match.
The costs are the move itself, agent commission of $35,000 or more on an Auckland sale, and leaving the neighbourhood. Many people on the Shore find the smaller home is in the same suburb, which removes most of the social cost. Others would have to move a long way to find anything cheaper, and for them it is a harder trade. I have written up the downsizing comparison with the full numbers.
Renting Out A Room Or A Flat
A boarder in the spare room at $250 a week is $13,000 a year, which is what a monthly advance from a reverse mortgage would give you without the debt. A self-contained flat under the house might bring in $400 a week or more.
It is income rather than borrowing, so it adds to what you have instead of subtracting from the house. The costs are privacy, the work of being a landlord, and tax: boarder income above the IRD’s standard-cost threshold is taxable, and a flat is a rental for tax purposes. It also only works if you want someone else in the house, which many people in their late seventies do not.
Family Loans And Family Equity Arrangements
If an adult child can lend or give the money now, the family keeps the interest the bank would have charged. The usual structure is a documented loan, interest-free or at a low rate, repaid from the estate, or a gift recorded against that child’s eventual share.
Two cautions. Get it in writing with a solicitor, because unwritten family loans cause more estate disputes than almost anything else. And be honest about whether the child can afford it without compromising their own mortgage or retirement. A reverse mortgage is sometimes the kinder option precisely because it does not ask the children for anything.
Lifetime Home And Other Equity Release Products
Lifetime Retirement Income, the company behind the Lifetime Income Fund, offers a product called Lifetime Home that releases home equity without debt. In broad terms you transfer a share of your home’s ownership to the scheme over a period of years, in exchange for regular payments, and you keep living there. There is no loan and no compounding interest; the cost is the share of the home you give up and the rules around leaving or selling.
It suits some people better than a reverse mortgage and others worse. Because the company I would refer you to does not pay me a referral fee for it, I will say plainly that I am not an expert in its terms. The product documents at lifetimeincome.co.nz set them out and I suggest a solicitor reads them with you. Home reversion schemes of the kind common in Australia, where you sell part of the home outright, have not taken hold in New Zealand.
Standard Lending And Overdrafts After 60
If you still have income, a bank may lend to you on a standard loan at a lower rate, with repayments that reduce the balance rather than grow it. The affordability test is strict after 65, but worth attempting before assuming it will fail. A small overdraft or a revolving credit facility can cover a one-off bill at a far lower total cost than setting up a reverse mortgage for $15,000. The comparison with a standard home loan is worth reading if you are under 65.
Government Support You May Be Missing
Several entitlements are available to homeowners over 65 and routinely go unclaimed:
- Rates rebate. Up to around $800 a year through your council for lower-income homeowners, applied for annually.
- Accommodation Supplement. Available to some homeowners with low income and modest cash assets, towards rates, insurance and mortgage interest.
- Winter Energy Payment. Paid automatically with NZ Super from May to September.
- Disability Allowance. Towards ongoing costs such as medical fees, heating and travel where there is a health condition.
- Residential Care Subsidy and Loan. For long-term care, means-tested; worth understanding before any equity release, because borrowing can affect the assessment.
Work and Income can check all of these in one appointment. Some clients have found a few thousand dollars a year this way, which closed the gap they were about to borrow to cover.
Comparing The Options Side By Side
| Option | Money released | Ongoing cost | What you give up | Best suited to |
|---|---|---|---|---|
| Downsizing | Largest | None | The house and the suburb | Large needs, or a house that no longer suits |
| Renting a room or flat | Modest, ongoing | Tax, landlord work | Privacy | Those happy to share |
| Family loan or gift | Varies | Usually none | Family goodwill if undocumented | Families with means and a solicitor |
| Lifetime Home | Regular payments | A rising share of the home | Part ownership | Those wanting income without debt |
| Standard loan or overdraft | Depends on income | Repayments now | Cash flow | Under 65 with income, or short-term needs |
| Government support | Small to moderate | None | Nothing | Everyone; check first |
| Reverse mortgage | Age-limited | Compounding interest | Part of the estate | Over 70, modest need, staying put |
If you want someone to walk through which of these fits your situation, that is the first half of every conversation I have. Book a chat and we will start with what you need, not with the product.
