Balance, Home Value And Equity
The second equity column shows what is left if the home does not grow in value at all.
| Year | Loan balance | Home value | Equity remaining | Loan as % of home | Equity if the home does not grow |
|---|
What The Chart Shows
The rising line is the loan. It compounds: interest is added each month and then charged on itself, so it curves upward rather than climbing in a straight line. At 8.25 percent a balance doubles in roughly eight and a half years.
The other line is the house, growing at whatever rate you chose. The gap between them is your equity, which is what you or your estate keep when the home is sold and the loan repaid.
In most scenarios with moderate house price growth, dollar equity rises over time even as the loan grows. The loan’s share of the home still climbs, and that share is what your family does not inherit. Both things are true, and the table shows both.
The Assumptions Behind The Numbers
- Interest is calculated monthly on the balance and added to it, which is how Heartland charges it. SBS compounds monthly as well.
- The rate stays constant for the whole period. It will not; both lenders’ rates are variable.
- The full amount is drawn at the start. Drawing slowly, through a reserve or a monthly advance, produces a lower balance than this calculator shows. That is a point in your favour, not a flaw in the tool.
- Fees are not included. Set-up costs are typically $2,000 to $3,000 including legal advice, and a discharge fee applies at the end.
- No repayments are made. Paying the interest, or any part of the loan, reduces the balance; neither lender charges a penalty for doing so.
- The home value grows at exactly the rate you set, every year. Real markets move in steps and stalls.
What The Calculator Cannot Tell You
Whether a reverse mortgage is the right tool for what you need, whether a lender will accept your property, how equity protection would change the result, how Heartland and SBS compare for your age and purpose, or how the loan would affect any means-tested support you might later apply for.
It also cannot tell you how long you will be in the house, which is the single number that matters most and the one no calculator can supply.
Talk through your result with Oliver
If the figures raise questions, that is what they are for. I prepare a proper written projection for every client, with the drawdown structure that suits them and both lenders' limits applied, before they decide anything. There is no charge for it; the lender pays a referral fee only if a loan settles, and I disclose that before we start.
Disclaimer: This article is general information about reverse mortgages in New Zealand. It does not consider your personal circumstances and is not a recommendation to take out, or not take out, any product. Lender rates, fees and criteria were checked at the date shown above and change over time; confirm them with the lender before relying on them. Oliver Broomfield is a licensed financial adviser (Future Matters Limited, FSP762214, under the NZFSG licence FSP286965). Read the disclosure statement for how he is paid.