You’ve probably heard about equity release and maybe wondered if it comes with monthly bills landing in your letterbox. Here in Auckland, over a quarter of homeowners over 60 are looking for ways to unlock a chunk of their home’s value without selling up and lugging furniture to a retirement village. But the idea of stubborn monthly payments isn’t exactly thrilling once you’re supposed to be winding down. So, what’s the deal? Is equity release just a mortgage in disguise, sneaking in payments each month? Or is it actually different?

What Is Equity Release and Who’s Using It?

Equity release is like finally raiding your home’s piggy bank after decades of topping it up. It’s popular with homeowners aged 60 and up—many of them empty nesters whose kids have left home, and who now find themselves sitting on massive home values while juggling rising living costs and patchy pension income. In New Zealand, property values shot up over the past two decades, and folk in cities like Auckland, Wellington or Tauranga often find themselves asset-rich but cash-poor.

The most common forms of equity release here are lifetime mortgages and home reversion schemes. With a lifetime mortgage, you borrow money secured against your house but keep your name on the title. Home reversion involves selling a share of your home for a lump sum or regular income, but you stay living there. According to Consumer NZ’s 2024 figures, nearly 4,000 Kiwis took up equity release products in the last year, nearly double the number five years ago. Older Kiwis often dip into this for reasons like paying off stubborn debt, topping up daily cashflow, or even helping adult kids onto the property ladder (no, it never ends!).

But here’s where it gets interesting—most people want to get the benefits of equity release without feeling like they’re shackled to new bills each month. So let’s crack into the most common question: does equity release come with monthly payments?

Equity Release and Monthly Payments—How Do They Work?

Alright, let’s cut to the chase. The short answer? In nearly all cases, you do not make monthly payments on traditional equity release schemes, especially lifetime mortgages. Here’s how it rolls: instead of coughing up interest and principal repayments each month, the interest gently snowballs on top of the loan. The full sum—original loan plus interest—gets paid back later, usually when you move into long-term care or after you pass away. At that point, the house is sold and the lender gets their cut, while anything left over goes to your estate.

Want some numbers? Check out this snapshot from a 2024 industry review of Kiwi equity release products:

So, by default, most equity release products in New Zealand don’t slap you with a fixed monthly payment. But there are a few twists you should know about. Some brands offer voluntary repayment features if you want to chip away at the debt (handy if the grandkids get rich and want to help!). But you’re not forced. The whole point for most people is to boost their cash in hand now without a new direct debit giving them sleepless nights.

Why is this set-up appealing? Think about it. Once you hit retirement, your income usually drops and budgeting gets a bit tighter. Freed from new bills, it’s easier to relax—though you’ll still need to keep a careful eye on how much that loan balance grows over time. Later, your estate sorts the final account, so there’s no endless trail of payments left behind.

Types of Equity Release Schemes: More Than One Way to Unlock Value

If you’re thinking about dipping your toe into equity release, it’s not a one-size-fits-all deal. Here’s a closer look at the two main paths Kiwis follow:

• Lifetime Mortgages: This is by far the most popular route. You borrow a chunk of cash (either a tidy lump sum or regular payments) secured against your home. Interest gets added every month, but you’re not required to pay it off till later. Some lenders do let you chip in voluntarily, but there’s usually zero pressure. You keep your name on the title and can stay put as long as you like.
• Home Reversion Schemes: With this, you sell a percentage of your home to the provider for a usually below-market price in return for either a lump sum or a regular income. You don’t pay rent or repayments, but when the house is sold, the provider collects their share at the going market rate. These are way less common in NZ—barely 5% of the equity release market, based on Spring 2025 figures—but worth knowing about for certain situations.

Here’s the tip: If you like the idea of extra cash without extra bills, focus on lifetime mortgages. And keep in mind, nearly all Kiwi lenders who offer these products are signed up to the Equity Release Council or an equivalent, which means they’re bound by pretty tough consumer safeguards.

But what about hybrids? Some platforms launched in 2023 now offer a blend—the option to pay interest as you go, drop in lump sums when it suits, or just sit back and let the interest roll up. This gives you way more control, especially if your situation (or mood) changes down the track.

One thing lots of folks miss: if you ever want out, check for early repayment charges. Some deals are flexible, but others will ding you for settling too early. Always give the T&Cs a good, sceptical squint.

Pros and Cons: No Monthly Payments Isn’t the Whole Story

No monthly payments sounds almost too good to be true. But, sure enough, it’s not a free ride either. Here’s where it gets real.

First up, the pros: cash in your hand without being on the hook for repayments. This is gold for people living on a strict superannuation income and struggling with everyday costs or big surprises (like leaky roofs or unexpected family emergencies—just ask my daughter Lila when she “needed” that orthodontic work!). Not having to pay every month can make the stress melt away, at least short-term.

But the flip side? Interest doesn’t vanish into thin air. Instead, it quietly builds up. If you live a long time, the amount you owe could be way more than you originally borrowed. That means there’s a smaller slice of the pie left for your kids or on your estate. In 2024, the average interest rate for a Kiwi equity release was about 7.5%—much higher than regular mortgages. Compound interest can be sneaky. Borrow $100,000 at 7.5%? In 10 years, you could owe close to $210,000. That’s double the original loan. I showed my son Rory this with a calculator and his eyes bugged out.

Providers here must cap the maximum you can borrow (usually 35%-50% of your home’s value, depending on your age and health). There are also “no negative equity” guarantees, meaning you’ll never owe more than what your home sells for. That’s been law since 2019, so there’s no risk of your family having to find extra cash to cover the shortfall. Still, your home might not be the asset-boosting legacy you once hoped, so it pays to be upfront with family about the impact.

And here’s another point often overlooked: while you’re not paying the lender each month, you’re still on the hook for rates, insurance, and keeping the place in good nick. Miss those, and you could breach your loan terms. As one 2025 survey by Massey University found, over 60% of borrowers misunderstood this, accidentally thinking all home costs would be “sorted”. Not so. Read the fine print. Always.

Making the Right Decision: Tips and Things to Watch Out For

This isn’t one of those sofa-shopping decisions. Whether you’re helping a parent or considering equity release for yourself, it pays to take it slow. Start by asking yourself:

• How much do you really need to unlock, and why?
• Can you handle the long-term impact on your estate (especially if you planned to leave the house to your kids)?
• Are you likely to want to move in the next 5-10 years? Many products have hefty exit fees if you up sticks too soon.
• Do you want lump sums, or does a drawdown facility (dripping out money as you go) suit you better?

Another veteran tip: always talk things through with independent financial advisers who know Kiwi products. Companies offering equity release can be helpful, but they also want your business—it’s like talking to the car dealer about whether you really need those leather seats. Consider discussing the decision with family ahead of time. Not only does it avoid drama later, but your kids might even have alternative ideas to help you out.

If you’re feeling wary about interest eating up your home’s value, check if your provider lets you make voluntary repayments whenever you have extra cash. Even $500 a year can slow down the compound snowball effect, protecting more of your home’s value. Is that always possible? Not with every product, so double-check the features before signing on the dotted line.

And don’t forget to shop around. In 2025, there are at least five active equity release lenders in New Zealand, each offering slightly different deals. Interest rates, fees, terms—they all matter. One home in Remuera got two totally different offers: one charging 6.95%, the other 7.95%. It pays—literally—to compare luck options.

As we hurtle forward, expect more flexibility and new products targeting younger retirees. One Auckland provider recently trialled a “reverse mortgage light” for over-55s wanting to boost part-time work with mini lump sums—the world keeps turning. But for now, the big choice remains: equity release can be a vital tool to age in place without monthly payments, but it’s definitely not a decision to make lightly. Take your time, read every page, and pull in the experts when you need them.