Trends in Reverse Mortgages - A New Option For Senior Homeowners
Everyone’s needs are unique--but a desire to enjoy a full life is universal. Often, this means having enough money to cover bills and relieve some of the anxiety that comes from figuring out how to make retirement more comfortable.
Many retirees looking for ways to supplement fixed incomes and defray living expenses are increasingly finding the answer in their homes--it is called a reverse mortgage.
The versatility of reverse mortgages has already been demonstrated by thousands of seniors who have used this tool to help them generate the cash needed to assist with a wide variety of financial needs. These loans, designed to give senior homeowners access to the wealth in their homes, have helped seniors remain in their homes, fund home health care, pay for modifications which made their homes safer, or simply created an income stream that provided seniors with peace of mind.
While still only a narrow slice of the home loan market, the reverse mortgage as a product is gaining at just the right time demographically. Increasing numbers of seniors have significant equity in their homes, but little in the way of income with which to meet increasing expenses, particularly in the area of health care, and many seniors simply don’t want to leave the home they’ve made for themselves. The "graying" of the baby boom generation clearly signals that the seniors of the near future will not only be more active in general, but will likely remain active for many more years than previous generations.
Industry Trends
The mortgage industry forsees a strong growth ahead for reverse mortgages amid a demographic shift to senior citizens as “Baby Boomers” approach retirement age. According to Fannie Mae, currently 20 million+ people are older than 65. Of these, 77 percent are homeowners and 84 percent own their home free and clear. Best of all 85 percent of senior homeowners want to remain in their home according to an AARP (American Association of Retired Persons) study.
Just a few years ago reverse mortgages weren’t on most consumers’ radar screens. But as the industry has educated consumers about these unique loans, their popularity has grown tremendously in a short time. The number of people taking out reverse mortgages has soared over the last five years, climbing from a loan volume of fewer than 6,000 loans annually prior to fiscal year 2000, to over 48,000 just in 2005, according to the U.S. Department of Housing and Urban Development (HUD).
This year, the industry is on pace to help even more seniors live a more comfortable lifestyle.
The Reverse Mortgage Forecast
* Source: HUD Data as provided by MBA of America
According to the U.S. Census, the population of seniors age 65 years and above is projected to increase 147 percent between 2000 and 2050. Currently seniors own over $2 trillion in home equity (NRMLA) and less than 1 percent has been tapped by the reverse mortgage program. |
