Do New Zealand home equity release schemes provide value for money?

Home equity release refers to financial products that allow people to access the equity that is tied up in their own homes. Home equity is a large part of household wealth in New Zealand, making it an important asset that could potentially be used to fund retirement. However, the take-up of equity release products such as reverse mortgages is very low.

This research examines whether home equity release schemes currently available in the New Zealand market provide value for money and how they might provide a suitable form of retirement income for some people. Assessments of the features and costs of current home release schemes, alongside worked examples using realistic values, highlight the scenarios when home equity release may (or may not) be beneficial. Depending on current circumstances and future financial needs, home equity release may be a suitable form of retirement income for some retirees but not for others.

A reverse mortgage calculator and home reversion calculator were created as part of the outputs for this research. These user-friendly calculators demonstrate how New Zealand equity release schemes work and can be used to estimate the potential benefits and costs of home equity release. Note that these calculators are for educational and illustrative purposes only and should not be taken as financial advice.

Citation

Benison, Thomas and Trinh Le. 2024. “Do New Zealand home equity release schemes provide value for money?". Motu Working Paper 24-03. Motu Economic and Public Policy Research. Wellington, New Zealand.

DOI: 10.29310/WP.2024.03