As more New Zealanders reach retirement carrying debt or struggling to meet rising living costs, reverse mortgages are moving from the fringes of financial planning into broader conversations about how housing wealth can support later life
Many retirees may own a valuable home, yet have limited income available for rates, insurance, healthcare, maintenance and everyday expenses and this has led to a significant rise in conversations around reverse mortgages.
Katrina Shanks (pictured, right), Chief Executive Officer of the Australian and New Zealand Institute of Insurance and Finance, says attitudes of the later-in-life lending have shifted considerably over the past five years.
“In 2021, reverse mortgages were still often viewed as a niche product or a last resort solution. Today, they are increasingly being considered as one option within a broader retirement funding toolkit.”
She says cost pressures have made the position of asset-rich but cash-constrained retirees more visible, raising questions about whether housing wealth should help support their independence and wellbeing.
“The growth in reverse mortgage portfolios over recent years suggests more New Zealanders are at least exploring that option, although it remains a relatively small segment of the overall mortgage market.”
Why are more borrowers carrying debt into retirement?
Will White (pictured, left), General Manager of Retail and Reverse Mortgages at Heartland Bank, says higher house-price-to-income ratios and later entry into homeownership are leaving people with less time to repay their loans before retiring.
“In the mid-1970s, a typical NZ house cost around 2.5 to 3 times a household's annual income. By 2026, that figure is about 10 times annual income nationally. The average age of a first home buyer was 25 in 1970 compared to 36 in 2026.”
Children may remain financially dependent for longer, while divorce, redundancy, business failure or a health setback can disrupt a retirement plan. Shanks adds that some retirees spent much of their careers without compulsory retirement saving, while others have reduced their reserves by helping adult children into property.
“People are also buying homes later in life, carrying larger mortgages relative to income, and often facing much higher house prices than previous generations.
“There is also a broader demographic shift. People are living longer, remaining active for longer, and wanting to maintain their lifestyle throughout retirement. As longevity increases, so too does the importance of ensuring retirement assets and income
last.”
Start with the retirement clients want to live
“The first conversation should be about outcomes, not products,” Shanks says.
“Advisers should start with understanding what the client wants their retirement to look like. Are they seeking additional income, funding healthcare costs, renovating their home so they can age in place, supporting family, creating a contingency fund?
“Only once those objectives are clear should specific solutions be discussed.”
White says signs that a client is deferring home maintenance, limiting heating or missing social and family events because of cost can point to financial stress despite substantial housing wealth.
“A lack of means can lead to isolation, and it is well documented that loneliness in our elder communities leads to less positive outcomes in both mental and physical health and wellbeing.
“Bearing in mind that Heartland encourages people to only borrow what they need and investigate all alternate options, a simple phone call or referral may well result in the retiree finding out that the actual cost of a carefully structured reverse mortgage is perhaps less than anticipated or feared.”
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Location, family connections, future mobility, healthcare needs and the ability to maintain the property should all be considered, says Shanks.
“A reverse mortgage may be appropriate in some situations, but it sits alongside other options such as downsizing, relocating, restructuring investments, home reversion arrangements, family support, or drawing on savings and other assets.”
A bridge between different stages of retirement
White believes reverse mortgages may still be overlooked because some advisers and clients are unaware of the ways they can be used. A retiree with an existing mortgage may assume the only choices are to continue meeting repayments from NZ Super or sell immediately.
“Managed well, a reverse mortgage can serve as a temporary bridge between life stages and provide the necessary time and space to make decisions with more clarity.”
Because an eligible homeowner can access equity without mandatory regular repayments, a reverse mortgage may relieve immediate cash-flow pressure. However, Shanks says advisers must explain compound interest and the trade-off between using equity now and preserving it for later needs or inheritance.
White says the way funds are drawn can materially affect the balance over time.
“If you only draw a small amount from a reverse mortgage each year, the interest compounds on the outstanding balance, not on the maximum loan available. Drawing funds gradually rather than taking a lump sum generally results in a lower total balance over time.”
The average term of a Heartland Bank reverse mortgage is 6.41 years, White says, while the average age of the youngest borrower is 73.
READ MORE: Single women turning to reverse mortgages to plug retirement income gaps
Where a line of credit may fit
Rather than borrowing a large lump sum at the outset, a reverse mortgage line of credit can give a retiree access to money as particular needs arise and Shanks says this feature is one of the most interesting aspects of modern reverse mortgage products.
“That could be for healthcare expenses, home maintenance, mobility modifications, replacing a vehicle, helping manage an unexpected financial shock, or simply providing peace of mind,” Shanks says.
“In that sense, it can operate more like a retirement contingency reserve than a traditional loan.”
This may suit clients who want to remain at home, have assessed other funding sources and want flexibility to respond to future costs. White nevertheless says savings and investments should generally be used first. Strong retirement plans may draw on different assets at different stages rather than treating home equity and investments as an either-or decision.
Addressing inheritance and common misconceptions
Inheritance can be one of the most sensitive parts of the discussion. Accessing equity today generally means less will be available later, but preserving the maximum possible estate may not be every client’s overriding objective.
“Retirement planning isn’t just about maximising an estate. It’s about maintaining independence, dignity, choice and financial security throughout later life,” Shanks says.
“So the challenge is finding the right balance.”
White says family discussions can identify alternatives and prevent misunderstandings.
“We have the equity protection guarantee for this exact purpose. While it may limit the amount the client can receive upfront it will preserve a percentage of the home’s value when it comes time to administer the estate.”
Neither contributor presents reverse mortgages as a remedy for inadequate savings or a default answer. However, their growing relevance instead gives advisers another option to assess against a client’s full circumstances.
“Advisers’ roles are not to promote a particular product. It’s to help clients understand the full range of options available, the trade-offs involved, and the strategy that best supports the retirement they want to live,” Shanks says.
For advisers, that means treating housing equity neither as untouchable nor as easy money.
“In many retirement plans, the optimal approach is not an ‘either/or’ decision but a coordinated strategy that uses both investment assets (if available) and home equity at different points in retirement to manage risk, taxes, and cash flow,” says White.
