Reverse mortgages in New Zealand are safer than their reputation. The products that gave equity release a bad name overseas, where borrowers were evicted or estates were pursued for shortfalls, do not exist here in that form. Both NZ lenders are banks, both are bound by the Credit Contracts and Consumer Finance Act, and both offer protections that are stronger than most people expect.
The risks that remain are real, and they are mostly about time.
Risk One: The Balance Outgrows Your Plans
The loan compounds. $100,000 at 8.25 percent is about $227,000 after ten years and $343,000 after fifteen. A sum that was modest beside the house at 70 is a serious share of it at 85.
This risk is entirely within your control at the start and entirely outside it afterwards. Borrow less, draw slowly, and the problem shrinks. Borrow the maximum at 62 and no later decision will undo it. Heartland’s own fact sheet warns against drawing most of the available funds at the start for exactly this reason.
Risk Two: Your Circumstances Change
A spouse dies and the survivor wants to move closer to a daughter in Tauranga. A hip gives out and the two-storey house is no longer workable. A grandchild needs help and the reserve has already been spent.
A reverse mortgage already on the title narrows your options for responding. The loan must be repaid if you leave permanently, so moving means selling and settling the balance first. Transferring the house to a child, or into a trust, is not possible while the mortgage is in place. A second mortgage cannot be registered behind it.
None of this is a trap. It is a constraint, and it is why the question “how long will I stay?” matters above any rate comparison.
Risk Three: Falling House Prices
If the house grows faster than the loan, your equity rises in dollar terms and the loan’s share of the home grows slowly. If prices stall for a decade, as they did across much of New Zealand between 2022 and 2025, the loan’s share grows quickly.
The no negative equity guarantee protects you from owing more than the sale price. It does not protect the equity in between. A $150,000 loan at 70 on a flat $900,000 house is 57 percent of the home by 85. The family keeps the rest, which is still a great deal of money, but it is not what they expected.
Protection: The No Negative Equity Guarantee
Both Heartland and SBS (which calls it a Loan Repayment Guarantee) promise that the amount required to repay the loan will never exceed the net proceeds from selling the property. If compounding interest and a weak market combine so that the loan is larger than the house, the lender absorbs the difference. Your estate is not pursued.
The condition is that you met the loan obligations: lived in the house, paid the rates, kept it insured and maintained. Let those lapse and the guarantee can fall away.
Protection: Lifetime Occupancy
The lender cannot require you to leave your home while you are living in it and meeting the loan conditions. There is no term, no review date and no point at which the loan is called up because of age or balance. The loan falls due only when the last borrower leaves permanently.
This is why both partners in a couple must be borrowers. If only one were on the loan and that person died, the survivor would not be protected.
Protection: Equity Protection Options
Both lenders let you ring-fence a percentage of the home’s future sale proceeds for your family, regardless of what the loan balance does. Heartland allows up to 50 percent, for a one-off fee of $55; SBS calls it a Protected Equity Percentage.
The cost is a matching reduction in what you can borrow. Protect 20 percent and the limit drops by 20 percent of what it would have been. For many families this is the single most reassuring feature of the product, because it converts “there will probably be something left” into “there will be at least this much”.
Protection: Independent Legal Advice And The Cooling-Off Period
You cannot take out a reverse mortgage without a solicitor of your own choosing explaining the contract to you and certifying that they have. This is a lender requirement, not an option. It costs you a fee and it is worth every dollar, because the solicitor’s duty is to you alone.
Heartland adds a 30-day cooling-off period. Repay the loan in full within 30 days of settlement, including interest, and the arrangement fee is refunded.
Both lenders also recommend that you talk to your family, and SBS asks for it as part of its process. Beyond the lenders, the Financial Markets Authority regulates financial advice, the Banking Ombudsman handles complaints about banks, and financial advisers such as me are bound by a Code of Professional Conduct and a dispute resolution scheme. The protections run deeper than the contract.
Reading The Fine Print Before You Sign
The clauses that matter most are the ones defining your obligations and what counts as leaving the home permanently. Both lenders allow temporary absences, for hospital stays and holidays, but an extended move into care or a long stay with family can trigger the repayment clause. Ask your solicitor to walk you through exactly where that line sits for your lender.
If you would like the risks and protections applied to your own situation, with a projection of the balance at today’s rate and a higher one, that is what I prepare before any client decides. The advice page explains how it works. For what happens when the loan ends, see repaying, selling or moving into care.
