A reverse mortgage is a loan secured against your home that you do not have to repay while you live there. The lender advances you money, interest is added to the balance each month instead of being paid, and the whole amount is settled from the sale of the house when you move out permanently or die.
In New Zealand you need to be 60 or older, you need to own the home (or be able to clear the existing mortgage with the new loan), and you can usually borrow between 10 and 50 percent of its value depending on your age. Two banks offer them: Heartland and SBS.
That is the short version. The rest of this guide covers everything I go through with clients before they decide, written so you can read it at your own pace and come back to the parts that matter to you.
What A Reverse Mortgage Is
The name confuses people, so here is the plainest way I know to put it.
With the mortgage you had in your forties, you borrowed a large sum and paid it back a little each fortnight until it was gone. With a reverse mortgage the direction is flipped. You start with a home you own, borrow a smaller sum against it, and pay nothing back for years. The balance climbs instead of falling.
You stay the owner. Your name stays on the title. The lender holds a mortgage over the property, the same as any bank would, and the loan is repaid when the house is eventually sold.
It is sometimes called a reverse equity mortgage, a home equity release loan or, in SBS’s case, SBS Unwind. They all mean the same thing.
How A Reverse Mortgage Works In NZ
The mechanics are the same with both lenders.
You choose how the money comes to you. A lump sum at the start, a regular monthly payment into your account, a reserve facility you can draw on when a bill arrives, or a combination. Heartland’s reserve is called a Flexi Reserve; SBS describes Unwind as working like a revolving credit you can draw up and down.
Interest is charged on what you have drawn, not what you could draw. If you set up a $60,000 facility and only use $15,000 for a new roof, you pay interest on $15,000. This is why I usually suggest clients set up a reserve rather than take a large lump sum.
Interest is added to the loan each month. Nothing comes out of your bank account. Next month’s interest is calculated on the new, slightly larger balance.
The loan is repaid when the last borrower leaves the home for good. That could be a sale, a permanent move into care, or death. Both lenders give the family time, usually up to 12 months, to sell the property and settle the loan. Any money left after the loan and accumulated interest are cleared belongs to you or your estate.
You can repay early. Neither lender charges a penalty for paying down or clearing a reverse mortgage early. A discharge fee applies when it is closed; Heartland’s is $270.
The detail on drawdown options and the full timeline sits in the article on how a reverse mortgage works.
Who Can Get One
The rules are about you and about the property.
You need to be 60 or older. If you are borrowing as a couple, lenders look at the age of the younger of you. Heartland may consider a partner aged 55 to 59 where the other borrower is over 60, with a lower borrowing limit.
The home needs to be your own residence in most cases, although Heartland now lends against second homes, holiday homes and rental properties as well. It needs to be freehold or able to be made freehold by the new loan, in sound condition, and insured.
Minimum property values apply and vary by lender and region. Heartland publishes a minimum of $250,000 and SBS applies the same floor, and both lenders can decline properties in locations they consider hard to sell. Apartments, cross-leases, leasehold titles and rural blocks are assessed case by case and are where I most often see one lender say yes and the other say no.
Income is not the test. You do not need to show you can afford repayments, because there are none. Lenders do check credit history and will want to see rates and insurance are up to date.
Full eligibility rules, including trusts and family ownership, are in the eligibility article.
How Much You Can Borrow
Age sets the ceiling. The older you are, the larger the share of your home’s value a lender will advance, because the loan is expected to run for fewer years.
| Age of youngest borrower | Heartland maximum | SBS Unwind maximum |
|---|---|---|
| 60 | 20% of value | 10% of value |
| 65 | 25% | around 15% |
| 70 | 30% | around 20% |
| 75 | 35% | around 25% |
| 80 | 40% | 30% |
| 85 | 45% | higher, case by case |
| 90 and over | 50% | up to 50% |
Heartland’s rule of thumb is the age of the youngest borrower minus 40, as a percentage of the home’s value. SBS starts lower and steps up. Both reduce the limit if you choose to protect a share of equity for your family, and both set a floor on the loan size, usually $5,000.
On a $1,000,000 Takapuna home, a 72-year-old couple could borrow up to around $320,000 from Heartland. That does not mean they should. The question I spend most time on with clients is how little they can borrow and still solve the problem, because every dollar left undrawn is a dollar not compounding.
The article on how much you can borrow has worked examples for different ages and property values.
What It Costs: Interest Rates And Fees
Reverse mortgage rates sit above standard home loan rates, usually by two to three percentage points, and they are floating. There is no fixed rate option with either lender.
As at October 2026, Heartland’s rate is 8.25 percent per annum and SBS Unwind’s is 7.99 percent. Both move with the lender’s funding costs and both lenders write to you when the rate changes. The gap between them has been small for several years and swaps around from time to time, so I would not choose a lender on rate alone.
The fees are mostly one-off:
- An establishment fee, deducted from your first advance so nothing is paid upfront.
- A valuation of the property, arranged by the lender.
- Your own solicitor’s fee for independent legal advice, which is compulsory with both lenders.
- A small fee each time you draw from a reserve facility (Heartland’s is $70).
- A discharge fee when the loan is repaid.
Budget somewhere between $1,500 and $3,000 for the set-up costs in total, depending on the valuation and your solicitor. The real cost is the interest, covered next.
Current rates and the full fee schedules are kept up to date in the interest rates article and the fees and costs article.
How The Balance Grows Over Time
Because nothing is repaid, the interest compounds. Each month’s interest is added to the balance, and the next month’s interest is charged on the larger figure. Over a decade or two the effect is large.
Here is a $100,000 loan at 8.25 percent, left untouched, against a $900,000 home growing at 3 percent a year.
| Years | Loan balance | Home value at 3% growth | Equity left | Equity left if the home does not grow |
|---|---|---|---|---|
| 0 | $100,000 | $900,000 | $800,000 | $800,000 |
| 5 | $151,000 | $1,043,000 | $892,000 | $749,000 |
| 10 | $228,000 | $1,210,000 | $982,000 | $672,000 |
| 15 | $343,000 | $1,402,000 | $1,059,000 | $557,000 |
| 20 | $518,000 | $1,625,000 | $1,107,000 | $382,000 |
Two things stand out. Your dollar equity usually keeps rising if house prices do what they have done historically, so a sensibly sized reverse mortgage rarely leaves a family with nothing. And the share of the home that the loan consumes still climbs from 11 percent to 32 percent in twenty years, which is the share your estate does not receive.
Drawing down gradually changes the picture a great deal. $20,000 a year for five years costs far less in interest than $100,000 on day one, because the later amounts have fewer years to compound.
The compound interest article works through more scenarios, and the reverse mortgage calculator lets you run your own figures.
Pros And Cons
I am wary of neat lists on this subject, because whether something is a pro or a con depends on who you are. These are the ones that come up in nearly every conversation.
What works in its favour
- You stay in your home, and both lenders guarantee that for life provided you meet the loan conditions.
- No repayments, so it does not compete with NZ Super for your weekly budget.
- Your age qualifies you, not your income, which is the only reason most retirees can borrow at all.
- You will never owe more than the home sells for. Both lenders carry that risk, not you or your estate.
- You can repay early without penalty if circumstances change.
What works against it
- The rate is floating and two to three points above a standard home loan.
- Compounding means a loan taken at 65 can double in under nine years.
- Your family inherits less, sometimes much less, than they expected.
- You cannot easily transfer the house to a child or into a trust while the mortgage is on the title.
- If you later need residential care, the loan has to be settled from the sale and that can affect how care is funded.
The pros and cons article goes into each of these with examples.
The Risks And The Protections You Should Expect
The risks are real, and they are mostly about time. The longer you live in the house with the loan running, the more it costs. A loan that looked modest at 65 can be a serious slice of the home by 85.
Circumstances change too. A spouse dies, a hip gives out, a child needs help. A reverse mortgage already on the title narrows your options for responding.
Against that, New Zealand reverse mortgages come with protections that are stronger than many people expect:
- A no negative equity guarantee. If the loan ever exceeds the sale price, the lender wears the difference.
- Lifetime occupancy. The lender cannot require you to leave while you are living there, keeping the home insured and maintained, and paying your rates.
- Equity protection options. Both lenders let you ring-fence a percentage of the home’s value for your family, in exchange for a lower borrowing limit.
- Compulsory independent legal advice. You cannot sign without your own solicitor having explained the contract to you.
- A cooling-off period. Heartland allows you to change your mind within 30 days and repay with the establishment fee refunded.
I have written the risks and protections up in full, including the fine print on what counts as leaving the home permanently.
What Happens To Your Home And Your Family
This is the question adult children ask first, and it is a fair one.
When the last borrower dies or moves out for good, the estate or the family has a window, usually up to 12 months, to sell the home. The loan and all accumulated interest are repaid from the proceeds. Everything left over passes to the estate and is distributed under the will, the same as it would have been.
The children can keep the house if they can repay the loan from other money. That happens, but less often than people assume, because the balance by then is usually larger than any one child can refinance.
Two things help. Equity protection, chosen at the start, guarantees a share of the home’s value for the family regardless of what the loan does. And talking to your children before you sign, rather than after, tends to avoid the resentment that comes from a surprise. Both lenders now encourage it, and SBS asks you to discuss it with family as part of its process.
The inheritance article and the article on repaying, selling and moving into care cover the rest.
Heartland Or SBS: The Two NZ Lenders
The big four banks do not offer reverse mortgages in New Zealand. Heartland Bank, which has written them since 2014 and now holds a book above $1.4 billion, is by far the largest provider. SBS Bank’s SBS Unwind is the only other product in the market.
In practice they differ on:
- Borrowing limits. Heartland lends more at each age, particularly between 60 and 75.
- Minimum property values. SBS has historically set higher floors in Auckland.
- Property types. Heartland lends on second homes, rentals and holiday homes through its Secondary Property Loan. Neither lends on retirement village units, though Heartland has a separate Village Access Loan for buying into one.
- Drawdown facilities. Both offer lump sum, regular payments and a reserve, with different fees for each draw.
- Fees and rates. Close, and they swap position from time to time.
One will often suit a particular client clearly better than the other once you line up their age, property and purpose. That comparison is most of what I do. The Heartland vs SBS article sets the two out side by side.
Alternatives Worth Considering First
A reverse mortgage is one tool. Before recommending it I check whether any of these would do the job more cheaply:
- Downsizing. Selling a $1.2 million family home and buying a $800,000 townhouse releases far more than any reverse mortgage, with no interest. It also means leaving the street, the neighbours and the GP, which for many people is the whole point of staying.
- A family arrangement. A child lends or gives money now, documented properly, in exchange for a larger share of the estate later.
- Renting out a room or a flat. Modest, but it is income rather than debt.
- Government help you may not be claiming. The Accommodation Supplement, rates rebates through your council, the Disability Allowance and the Winter Energy Payment are all underclaimed by homeowners over 65.
- A standard loan or overdraft. Possible after 60 if you still have income, and cheaper, but repayments start immediately.
The alternatives article compares these properly.
How To Get Specialist Advice
Both lenders will explain their own product well. Neither will tell you whether the other one suits you better, and neither has an incentive to suggest you borrow less or not at all.
That is what specialist advice is for. I look at what you need the money for, whether a reverse mortgage is the right tool, which lender fits your property and age, and how little you can borrow to solve the problem. You get a written comparison and a projection of the balance over time to take to your family and your solicitor. If you go ahead, I run the application.
The first chat is free, with no obligation. The lender pays me a fixed referral fee only if a loan settles, so there is no charge to you for the advice. Details of how reverse mortgage advice works with me, and what to have ready, are on the advice page.
