Older homeowners tend to be more likely to own their homes outright, without a mortgage. They also tend to be conservative and want to “save something for the kids.”
They also tend to run out of money deep into retirement, lacking the funds to maintain their homes.
Enter the reverse mortgage. If the owner owns the home outright, or with a small mortgage, and is at least 62, the lender pays them each month, rather than the other way around. The lender is paid back, with interest, when the senior moves out of the house, or dies and “the kids” sell it.
According to the Mature Marketing Institute, reverse mortgages, also known as “home-equity conversion mortgages” (HECMs), are becoming more popular with senior homeowners. Reporting on 55-plus housing trends at the International Builders Show here, the MMI said:
– There is a consistent increase in seniors using HECM and reverse mortgages.
– Sixty percent of 55-plus owners don’t have mortgages; 12.3 percent have some sort of mortgage. Just 241,000 have reverse mortgages, but that is a big increase from 150,000 or so in 2007. Experts say seniors need to look at home equity for income in retirement.
– The people who are using reverse mortgages tend to be older single females who have been in their homes for quite some time.
– Seven percent of reverse mortgages are held by people in active-adult communities. That is trending upward.
– Of seniors with a mortgage, the average age is 63 years. Of seniors with no mortgage, 71 years. Of seniors with reverse mortgage, 77.
Also:
– People are using sale of a prior home to fund the sale of a new home. In 2001, 71 percent used sale of previous home to finance a 55-plus home. That was 55 percent in 2009. There is an increase in people using savings or cash on hand — clearly one impact of the fall in home values and home equity.
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