More Reverse Mortgage Applicants are Closer to Age 62

More reverse mortgage applicants are closer to the minimum age requirement of 62, in part because of tough economic times and the growing number of potential borrowers – with the leading edge of Baby Boomers having reached their mid-60s.
More borrowers ages 62 to 69 are looking for ways to tap home equity as a solution to urgent financial shortfalls, according to a report produced by MetLife’s Mature Market Institute, with the nonprofit National Council on Aging.
While the average age of borrowers is about 73 years old, the average age of homeowners who went through the Home Equity Conversion Mortgages (HECM) reverse-mortgage counseling between September and November 2010 was 71.5 years old.
The Department of Housing and Urban Development’s HECM represents the majority (95 percent) of reverse mortgages that are originated in the United States. This program began in 1990, but only grew in popularity over the past 10 years.
Of homeowners who are considering a reverse mortgage, 46 percent are under age 70.  One in five (21 percent) are leading-edge Baby Boomers (age 62 to 64), despite lower available loan limits, according to the MetLife/NCA report.
In comparison, homeowners who were about the minimum required age of 62 represented only 6 percent of borrowers who applied for reverse mortgage loans during 1999.
The report also found that out of HECM counseling clients in 2010, most of these homeowners (67 percent) wanted to lower household debt. Only 27 percent were considering a reverse mortgage to enhance their lifestyle.
Even fewer (23 percent) saw the need to plan for the future as a reason to take out this type of loan, indicating that reverse mortgages are no longer a “one-size-fits-all” solution, the report said.
About two-thirds (67 percent) of recent counseling clients have a conventional mortgage that will need to be repaid if they decide to take out a reverse mortgage.
About one in four (27 percent) reported having both housing and non-housing debt.
Borrowers with sizable existing debt may rapidly deplete home equity by accessing the equity to repay debt, the report said.
About one-third (32 percent) of counseling clients of an existing mortgage that may exceed 50 percent of the value of their home.
“They may not have enough equity to qualify for a reverse mortgage, or may have to wait several years until they qualify for a loan of a sufficient size to meet their financial goals,” the report said.
See HUD’s FAQs Web page on reverse mortgages.

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