Reverse Mortgages in NZ: What They Mean for Your KiwiSaver After 60

Why a KiwiSaver adviser is writing about a mortgage product

Because KiwiSaver is still a relatively young product and KiwiSaver balances for retirees in 2026 are, on average, relatively low. Owning a house is highly advantageous in retirement, but cash is also needed to live. I like to explore all possibilities with my clients at all stages of life.

So this is not a sales pitch for a reverse mortgage. It is an honest look at what the product does well, what it does badly, and where it sits in the order of things if you also have a KiwiSaver balance.

What a reverse mortgage actually is

Strip away the marketing and it is simple. You borrow money secured against your home. You make no repayments. The interest is added to the loan balance each month rather than being paid out of your pocket. The loan is repaid when the house is sold, which for most people means when they move into care or after they die.

House prices usually go up over time, meaning that the higher sale of the house can relieve some of the impact of this interest occurred during the period of the mortgage.

That is the whole product. Everything else is detail about how much, how you take it, and what protections come attached.

In New Zealand, Heartland is the provider most people are asking about, and the one with the widest presence in this market.

Who can get one

• Age. Heartland lends to borrowers aged 60 and over, with a maximum of two borrowers. A borrower aged 55 to 59 may be accepted where the other borrower is over 60.
• The property. Most commonly it is your own home, but it does not have to be. Heartland also offers a Second Property Loan secured against a holiday home, bach or investment property, which suits people who would rather not release equity from the house they live in. Either way the property needs to be of conventional construction, in good repair, and above Heartland's minimum value, currently $250,000. Location matters to a valuer, and properties well outside main centres can be harder work.
• Independent legal advice. This is not optional. Your own solicitor has to advise you before you sign, and you pay for that. Treat it as a feature rather than a hoop, because a good solicitor will ask you the uncomfortable questions.

How much you can borrow

The limit is driven mainly by the age of the youngest borrower, plus the value and type of your home. It starts low and rises as you get older, because the lender is estimating how many years of compounding it has to cover before the house is sold.

As a rough guide it begins somewhere around 15% to 20% of the property value at age 60, and climbs by roughly a percentage point for each year of age from there. Do not plan around that estimate. Heartland publishes a reverse mortgage calculator that gives your actual figure, and the number it produces is the one that matters.

The practical consequence catches people out: at 60 you can borrow the least, and you have the longest time for the debt to compound. The product is at its weakest at exactly the age most people first go looking at it.

How you take the money

Heartland offers three ways to draw, and they can be combined:

• An initial lump sum on settlement. Interest starts immediately on the whole amount.
• A cash reserve facility, which sets money aside for later without drawing it. Nothing you have not drawn is charged interest. For a lot of people this is the most useful part of the product and the least understood.
• Regular monthly advances, for up to 10 years. This is the option that behaves most like an income top-up.

The structure matters enormously to the final cost. Taking $120,000 as a lump sum at the start and taking $1,000 a month for ten years are not the same loan. In the second case, most of the money has been in your hands for far less time, so far less interest has accrued. I come back to this below, because it is the single easiest way to make this product cheaper.

The protections that come with it

• Lifetime occupancy. You continue to own and live in your home for as long as you choose, provided you keep to the loan conditions such as rates, insurance and maintenance.
• A no negative equity guarantee. The amount required to repay the loan will never exceed the net sale proceeds of the property. Your estate cannot end up owing money on top of the house.
• An equity protection option. You can ring-fence a chosen percentage of the eventual net sale proceeds, up to 50%, so that share is guaranteed to come back to you or your estate. The catch is symmetrical: protecting 20% reduces the maximum you can borrow by 20%.

Those protections are real and they are the reason this product is not the horror story its reputation suggests. The reputation was earned overseas, and by older products, not by the terms on offer here today.

The good points, stated fairly

1. It solves the actual problem

There is a specific and very common New Zealand situation: mortgage-free house worth $700,000 or more, NZ Super coming in, and almost nothing liquid. Asset rich, income poor. Research commissioned by Te Ara Ahunga Ora Retirement Commission found this describes a meaningful share of retired households, typically aged 75 or older and no longer working, with home equity averaging over $600,000.

You cannot eat a house. For those households, home equity is the only substantial asset they have, and a reverse mortgage is one of the very few ways to turn a slice of it into money without moving out.

2. No repayments, so no cash flow strain

This is the feature that makes it work for someone on NZ Super alone. A normal loan of $100,000 at 8% over 15 years needs about $950 a month, which is simply not available. A reverse mortgage needs nothing. The cost is deferred rather than removed, but deferral is exactly what the borrower needs.

3. It does not reduce your NZ Super

NZ Super is not income or asset tested, so drawing on your home equity does not reduce it. The money you receive is borrowed, not earned, so it is not taxable income either. That is genuinely useful and it is a point people often get wrong.

One caveat worth flagging rather than glossing over: the Residential Care Subsidy is means tested. How a reverse mortgage interacts with that test is a real question, and it is one for Work and Income and your lawyer, not something to assume either way.

4. It is far cheaper than what people otherwise use

This is the argument I find most persuasive, and it is the one that Motu Research reached in its work for the Retirement Commission. Reverse mortgage rates are higher than an ordinary home loan, but they are roughly half what consumer lending charges.

Take $18,000 sitting on a credit card at about 20%. That is around $3,600 a year in interest. The same $18,000 on a reverse mortgage at 8% is around $1,440 a year. If somebody is genuinely going to carry that debt either way, moving it from the card to the house is arithmetic, not ideology.

The condition attached to that argument is severe, and I will not soften it: it only works if the spending that created the card balance actually stops. Otherwise you have cleared the card, kept the habit, and added a compounding loan to the house.

5. The undrawn cash reserve costs nothing

Being able to arrange a facility, draw a small amount now, and leave the rest sitting there uncharged is a legitimately good piece of design. It means a 72 year old worried about a future roof or a future hip does not have to borrow today against a maybe.

6. You stay put

Advisers tend to underrate this because it does not show up in a spreadsheet. Staying in your own home, in your own street, near the people who check on you, has real value. Downsizing is often the financially superior answer and is still the wrong answer for the person living it.

The bad points, stated just as fairly

1. Compounding runs the other way

Everything I write about KiwiSaver celebrates compound interest. This is the same force pointed at you.

Here is $100,000 borrowed at 8% a year with no repayments, rounded:

• After 5 years: about $146,900
• After 10 years: about $215,900
• After 15 years: about $317,200
• After 20 years: about $466,100
• After 25 years: about $684,800

At 8%, the debt doubles roughly every nine years. Borrow at 62 and live to 87 and that $100,000 has become about $685,000.

This is where the point I made earlier matters. A rising house price relieves some of the impact of that interest, because the debt is repaid out of a larger sale. Put it against a house and you can see how much it relieves. Borrow $100,000 at 60 against an $800,000 home, and assume the house grows at 3% a year:

• At 70: debt about $215,900, house about $1,075,000, so the loan is around 20% of the value.
• At 80: debt about $466,100, house about $1,445,000, so the loan is around 32% of the value.

That looks survivable, and it is. Growth in the house has absorbed a good deal of the interest. But it only works while the growth keeps coming, and nobody can guarantee that it will. Run the same loan with the house price flat at $800,000:

• At 70: debt about $215,900, remaining equity about $584,100.
• At 80: debt about $466,100, remaining equity about $333,900, with the loan now 58% of the value.

Same loan, same rate, and a very different retirement village conversation at 80. The no negative equity guarantee means you can never owe more than the house is worth, which protects your estate from disaster. It does not protect you from having far less left than you expected.

2. The rate is variable

These are variable rate loans. Heartland's advertised reverse mortgage rate has been sitting near 8% a year through 2026, but the whole point of a variable rate is that it moves, and you are carrying it for what could be twenty-five years with no ability to pay it down from income. A two point rise sounds small. On a loan doubling every nine years at 8%, it is a loan doubling every seven and a half years at 10%.

3. Fees, on top

Expect an arrangement or establishment fee, a valuation fee, your own solicitor's fee for the mandatory independent advice, and a further fee if you top the loan up later. Heartland publishes the current schedule on its interest rates and fees page and you should read it, because these are real money and they are charged at the start, when the balance is smallest, which is exactly when a percentage cost bites hardest.

This is why a reverse mortgage is a poor answer to a short-term problem. If your plan is to downsize in three years anyway, downsize now.

4. It takes the inheritance

Say it plainly, because families do not. The debt is repaid out of the sale of the house, and that is money your children were possibly counting on, whether or not anyone has said so out loud.

That is not automatically a reason to avoid it. It is your house and your retirement, and I have watched people live thinly for years to preserve an inheritance for adult children who were financially fine and would have preferred their parents took the holiday. But it is a conversation to have deliberately, with the family in the room, before the paperwork rather than after the funeral. The equity protection option exists precisely so you can put a floor under it.

5. It narrows your later options

The equity in your home is also the thing that funds a retirement village occupation right agreement, a move closer to family, or a care top-up. Every dollar of compounding debt is a dollar less of flexibility at the age you are least able to go and earn more. The people who get into trouble with this product are not usually the ones who borrowed too much at 80. They are the ones who borrowed at 62 and needed to move at 84.

6. The reputation problem is not entirely unfair

New Zealand retirees are notably suspicious of these loans, and the research into low take-up keeps finding the same reasons: high fees, poor understanding, and a strong feeling that the bank ends up owning the house. The protections have improved a lot. The instinct that this is a serious, hard to reverse decision is still correct.

The KiwiSaver question: which pot do you spend first?

This is the part nobody else is going to tell you, and it is the reason this article exists.

If you are 65 or over, you have two sources of money: your KiwiSaver balance and your home equity. Both have a cost.

• Spending KiwiSaver costs you the return you give up. If your balanced fund would have earned, say, 6% before tax, then spending $50,000 costs you the growth that $50,000 would have produced.
• Borrowing against the house costs you the interest rate, plus the fees, and the interest compounds. At around 8%, that cost is certain, contractual and unavoidable.

So the default order is straightforward: draw your KiwiSaver first, and leave the house alone. You are giving up an uncertain return rather than taking on a certain cost that is higher than that return is likely to be after fees and tax. There is no clever structuring that beats simply not borrowing at 8% when you have your own money sitting there.

The mistake I see most often

Somebody has $250,000 in a growth KiwiSaver fund, does not want to "touch the KiwiSaver", and takes a reverse mortgage to fund the campervan.

Look at what that actually is. You are paying a guaranteed 8% that compounds against your house, in order to keep money invested at a hoped-for 6% or 7% that might be negative for two years running. You have not protected your KiwiSaver. You have borrowed to gamble on it, at a rate the fund has to beat before you are even level. In most cases it is straightforwardly worse than just making the withdrawal.

The emotional pull is completely understandable. The KiwiSaver balance feels like an achievement and the house feels like it will always be there. The arithmetic does not care.

Four situations where the order genuinely flips

These are the real exceptions, and they are not rare.

1. You are 60 to 64. Your KiwiSaver is locked until 65 unless you meet one of the narrow hardship or illness tests. If the roof is leaking now, the house is the only tap you can open. This is the cleanest case for a reverse mortgage there is, and it argues for borrowing small, borrowing late, and having a plan for what happens at 65.

2. Markets have just fallen hard. Selling units after a 20% drop turns a paper loss into a real one, and doing that in the first few years of retirement is the single most destructive thing a drawdown plan can do. A small cash reserve facility can bridge you for a year or two so you are not forced to sell at the bottom. This is a legitimate, sophisticated use of the product, and it comes with a warning: it only works if you actually stop drawing on it when the market recovers.

3. Your KiwiSaver is simply too small for the job. A $45,000 balance does not fund a $150,000 accessibility retrofit. If the alternative is not doing the work, or doing it on a personal loan at 15%, the reverse mortgage is the better instrument.

4. What you need is certainty of tenure, not a bigger balance. Sometimes the honest goal is "I want to die in this house". That is a legitimate financial objective and the products that serve it are not the ones with the best expected return.

If you are going to do it, do it in the cheapest shape

The structure changes the cost more than the rate does. Three rules I would hold to:

• Borrow as late as you can. Every year you delay is a year the balance is not compounding, and a higher borrowing limit when you do.
• Take instalments over lump sums where the need is ongoing. Money you have not drawn yet is money not accruing interest. Drawing $1,000 a month for ten years costs meaningfully less than taking $120,000 on day one, because most of it spent far less time on the balance.
• Use the cash reserve rather than over-borrowing "just in case". The undrawn portion is free. Borrowed cash sitting in a bank account earning 4% while the loan charges 8% is a slow leak.

Who this can genuinely help

These are illustrative situations, not real clients, and the figures are there to show the shape of the decision rather than to predict anyone's outcome. Heartland publishes its own customer stories and a video guide if you want to hear it from borrowers rather than from an adviser.

The 62 year old with a failing roof

Mortgage-free, $95,000 in KiwiSaver, still working two days a week. The roof needs $55,000 spent on it now and KiwiSaver is three years out of reach. A small, targeted draw does the job, and at 65 there is a real decision to make about whether to repay it from KiwiSaver or leave it running. Good use, with a plan attached.

The 74 year old widow on Super alone

House worth $820,000, mortgage-free, $38,000 in KiwiSaver, no other income. She is short about $500 a month and has been quietly running it up on a credit card. Monthly advances at 8% replace card debt at 20%, and at 74 the compounding runs over a shorter horizon than it would have at 62. This is precisely the household the Retirement Commission research identified. Good use.

The 68 year old with $18,000 on the card

Consolidating $18,000 from about 20% to about 8% saves roughly $2,100 a year in interest. Worth doing, only if the card is closed and the underlying budget actually balances afterwards. Otherwise it buys eighteen months of relief and doubles the eventual problem. Conditionally good use.

The 70 year old in a bad market year

$310,000 in KiwiSaver, drawing $2,000 a month, and the fund is down 18%. A modest cash reserve covering twelve to eighteen months lets the portfolio recover instead of being sold into the fall. Advanced use, and it needs an exit rule written down before you start.

The 66 year old who wants the campervan

$280,000 in KiwiSaver, wants $60,000 for a vehicle and a lap of the South Island. There is no good reason to borrow at 8% here. Withdraw from KiwiSaver, adjust the fund mix for the lower balance, and go. Not a good use.

The 63 year old planning to downsize at 66

The fees are front-loaded and three years is not long enough to spread them over. If the plan is to move anyway, move. Not a good use.

Questions I would want answered before signing

• What is the balance projected to be at 80, at 85 and at 90, at the current rate and at the current rate plus two percent? Ask for it in writing.
• What is the total of every fee, including my own solicitor?
• Have I drawn down KiwiSaver first, and if not, exactly why not?
• Could I take less, later, or in instalments instead of a lump sum?
• Should I use the equity protection option, and what does it cost me in borrowing capacity?
• What happens if I need to move into care in five years? In ten?
• Does my family know, and have I told them myself?
• Is there a version of this problem that downsizing, a boarder, or an unclaimed entitlement solves instead?

The bottom line

A reverse mortgage is neither a scam nor a solution. It is an expensive, well-protected tool that is excellent at one specific job: turning home equity into money for somebody who is asset rich, income poor, and staying put.

If that is you, it deserves a serious look, and the protections in the New Zealand product are better than its reputation suggests.

If you have a healthy KiwiSaver balance and you are over 65, start there instead. Drawing your own money is almost always cheaper than borrowing at 8% against the house, and I would rather help you structure a sensible withdrawal plan than watch you pay a bank for the privilege of not touching your own savings.

Either way, the order you spend things in is a decision, not an accident. Make it deliberately.

If you are approaching retirement, or already there, come and talk it through with me. A free session covers anything to do with your KiwiSaver and your retirement planning: what your balance will realistically support, how to draw on it, what fund you should be in now, and where something like a reverse mortgage might fit alongside it. No obligation, and nothing to sign.

Written by Cameron Steele, KiwiSaver Specialist & Financial Adviser based in Christchurch, New Zealand.

Sources and further reading

Product terms, rates and fees change. Check the current position before you act on any figure here:

• Heartland Bank - Reverse Mortgages - the product itself, including current rates, fees, drawdown options and the eligibility criteria.
• Heartland - customer stories and the video guide - borrowers describing their own reasons.
• Te Ara Ahunga Ora Retirement Commission - independent research on home equity release, including the Motu work on whether these schemes represent value for money.
• Sorted - reverse equity mortgages - the free, independent explainer, with no product to sell.
• Inland Revenue - getting my KiwiSaver when I retire - the official withdrawal rules from 65.
• Work and Income - Residential Care Subsidy - the means test that a large change in your equity may interact with.
• Use my free KiwiSaver calculator to model the drawdown side of the decision year by year before you look at borrowing.