The advantages are real and so are the disadvantages, and most of the lists online are written by people who only want you to see one side. The lenders lead with the benefits. The commentators who call it a last resort lead with the costs. Both are describing the same product.
Here is the version I give clients, including the ones that cut both ways.
The Advantages Worth Having
You stay in your home, and the lender promises you can. Lifetime occupancy is a written promise from both Heartland and SBS. As long as you live there, pay the rates, keep it insured and maintain it, nobody can require you to leave.
No repayments. Nothing comes out of the household budget. For a couple on NZ Super with a paid-off home and no savings, this is often the only form of borrowing that does not make the week harder.
Your age gets you the loan, not your income. Banks assessing a standard loan after 65 look for income most retirees do not have. Reverse mortgage lenders look at your age and the house. For a lot of people over 70 it is the only secured credit available to them.
You can never owe more than the house is worth. The no negative equity guarantee means the lender absorbs any shortfall at sale. Your estate is never pursued for the difference, provided you met the loan conditions.
You can repay early with no penalty. Because the rate floats, there is no break fee. Pay the interest for a few years, pay a lump sum when a term deposit matures, or clear it entirely; the only cost is a $270 discharge fee at Heartland when it closes.
You control how fast you use it. A reserve facility means interest is only charged on what you have drawn. Used carefully, a reverse mortgage can be a $30,000 safety net that costs almost nothing until the day you need it.
The Disadvantages That Catch People Out
The rate is higher than a home loan and it floats. Around 8 percent in late 2026, two to three points above standard floating rates, with no fixed option. If rates rise, the balance grows faster than any projection you were shown.
Compounding is relentless. With nothing repaid, the balance at 8.25 percent doubles in about eight and a half years and triples in fourteen. $100,000 at 65 can be $343,000 at 80.
Your family inherits less. Sometimes much less. The loan and all the interest come out of the sale before anything goes to the estate. On a long loan drawn heavily, half the house can go to the lender.
It limits what you can do with the house. You cannot transfer it to a child, put it into a trust or take a second mortgage while the loan is in place. Renting it out is generally not permitted on an owner-occupied loan. Moving the loan to a new property needs the lender’s agreement.
It can affect means-tested support. Money drawn and held as cash counts as an asset for the Residential Care Subsidy, and borrowing can affect the Accommodation Supplement. Work and Income can tell you how; it is worth asking before you borrow.
It costs money to set up. Around $2,000 to $3,000 including the solicitor. Trivial against the interest, but real if you only keep the loan a year or two.
The Pros That Depend On Your Circumstances
Some features are an advantage for one person and a disadvantage for the next.
The house keeps growing in value, and you keep the growth. Over a long period of strong house price growth, your dollar equity can be higher at the end than at the start despite the loan. Over a flat decade, it will not be. This is the single biggest variable and nobody can promise which way it goes.
Equity protection. Both lenders let you ring-fence a share of the home’s future value for your family, in exchange for a lower borrowing limit. A clear win for someone with children who matter to them and a modest need; irrelevant for someone with no heirs and a larger need.
Age. At 60, the loan has decades to compound and the limit is 20 percent. At 80, the limit is 40 percent and the loan likely runs under ten years. The same product is far more expensive for the younger borrower.
Not being pressed to decide. Neither lender pressures you, which is good. It also means nobody will tell you if the amount you asked for exceeds what you need.
Weighing Them Against Your Own Plans
Ask three questions. How long will I be in this house? How much do I need, and could I need it slowly rather than all at once? What do I want to leave, and have I told the people I want to leave it to?
If the answers are “a long time”, “not much, slowly” and “we have talked about it”, the advantages mostly apply to you. If they are “a few years”, “the maximum” and “not yet”, the disadvantages do.
Where Advice Changes The Answer
The lists above are general. The useful version is the one with your age, your house, your need and both lenders’ terms applied, with the balance projected at today’s rate and a higher one. That is what I prepare for every client before they decide, and it costs you nothing because the lender pays a referral fee only if a loan settles. Book a chat, or read whether a reverse mortgage is a good idea for the situations where it tends to work.
