Onward with Reverse: Reverse mortgages help retain home ownership
Jack Bauer/The Herald (Sierra Vista, AZ)
22 August 2011
American seniors still see their home as their best investment.
The decline of home prices since the housing bubble burst has not affected their perception of home investment value, says a recent Pew Research Center study. Eighty-one percent of adults believe that buying and retaining a home is still the best long-term investment. Homeownership, and being able to live comfortably in retirement, were rated the highest of four financial goals, the study reported.
A reverse mortgage is a great solution to the above two goals. You retain ownership of your home and realize extra cash to live on. Plus you have no monthly mortgage payments the rest of your life. This works whether you presently have a mortgage or the home is free and clear.
You only need about 30 to 35 percent equity which most seniors have by the time they are 62 years old, which is the minimum age requirement of a reverse mortgage.
Senior home owners understand what has happened to home prices in these economic times. The Pew Survey shows, “47 percent believe their home is worth less now than before the recession began, and 31 percent say its value has stayed the same. Just 17 percent say their home is worth more.”
GreenPath Debt Solutions recently did a survey of 57,000 seniors. Thirty seven percent reported that reduced income is their main source of financial hardships.
“They find themselves in a position where their incomes are fixed at yesterday’s wages and their expenses are growing at the rate of today’s inflation.” Trying to help more seniors obtain reverse mortgages, the National Council on Aging just announced it will be waiving its fees for reverse mortgage counseling.
Just eliminating a present mortgage payment with a reverse mortgage is enough to turn many senior’s lives around for the better.
To help more retain homeownership, there’s been a lot of talk about lowering the age requirement below 62.
Our neighbors to the north are ahead of us.
Canada’s largest reverse mortgage company, HOMEQ, recently lowered their age requirement to 55. They had previously been at 60, not 62 like here in the U.S. HOMEQ says it is especially helping those couples where the age of one is several years younger than the other.
HOMEQ saw the number of applications grow 18 percent in the second quarter of this year.
The U.S. mortgage companies will probably follow suit lowering the age in the future, but I don’t believe it will happen for several years.
When it does, it will probably be done by private (non FHA-backed) companies, so the interest rates will be higher and the loan-to-value will be lower.