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U.S. Seniors’ Housing Wealth Now at $5.9 Trillion Reverse Mortgage Opportunity

September 29th, 2016  | by Jason Oliva – Published in Reverse Mortgage Daily

The amount of housing wealth held by U.S. senior homeowners continues to grow at a billion-dollar clip, propelling the potential opportunity for reverse mortgages to nearly $6 trillion nationwide, according to a recent analysis of home equity among Americans age 62 and older.

With a $135.2 billion gain during the second quarter of 2016, the aggregate value of senior home equity now stands at $5.9 trillion, according to the latest Reverse Mortgage Market Index (RMMI) published this week by the National Reverse Mortgage Lenders Association.


With the second quarter of 2016 in the books, the RMMI has now reached a new peak reading of 212.45, up from 207.60 during the previous quarter, and an 8.7% year-over-year increase.

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Compiled in conjunction with RiskSpan, the RMMI provides a quarterly index level for the aggregate amount of home equity held by senior households age 62 and older.

First published in the first quarter of 2000, when senior home equity totaled $2.38 trillion nationwide, the RMMI was benchmarked at an index level of 85.47. After reaching a peak reading of 182.25 in the first quarter of 2006, the RMMI declined through Q1 2009, when senior home equity plummeted to a trough of $3.48 trillion and the index dropped to 125.08.

Since then, the housing market’s recovery and the growing population of senior homeowners have contributed to an upward trajectory for the RMMI, according to NRMLA, which notes that during the second quarter of 2016 senior home values have reached $7.4 trillion, while senior-held mortgage debt grew by $10.75 billion to a total of $1.48 trillion.

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“Healthy improvements in the housing sector are creating more financial options for senior homeowners who want to stay in their home as long as possible but who may need to make structural modifications or coordinate care services to manage living there safely and independently,” said NRMLA President and CEO Peter Bell.

 

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Rising home equity levels arrive at a time when homes among the age-62 and older population are likely in need of upgrades to support aging inhabitants, according to a May 2016 report from the Bipartisan Policy Center’s Senior Health and Housing Task Force.

Furthermore, rising costs for in-home care services also pose significant challenges to enabling senior homeowners to age in place, particularly for low- and middle-income households. For example, the national median cost for home health aide services run $41,600 per year, according to the Task Force.

Considering these expenses, the Task Force suggested that home equity, accessed through a reverse mortgage, can offer homeowners the cash flow needed to cover these necessary costs.

“Incorporating home equity into a retirement funding stream with a reverse mortgage is not a new idea, but important new protections for borrowers have regenerated interest in this strategy, which can help more seniors afford the tools to live safely in their homes for a longer period of time,” Bell said.

The RMMI for the first quarter of 2016 was revised from its original reading of 209.12 to an updated index level of 207.60, NRMLA noted, primarily because of the updated Federal Reserve total housing value in the third quarter release.

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Reverse Mortgage Facts to Know

There are many, many Baby Boomers retiring or getting close to retiring, but with savings low and other investments not bringing in much to put toward retirement, boomers are looking for alternatives. Reverse mortgages are one solution they are starting to consider more than previously due to the large amount of equity in their homes, according to a recent article from U.S. News & World Report. Here are some Reverse Mortgage Facts that may come in handy.

about reverse mortgage - old peopleA reverse mortgage can be used instead of a traditional home equity line of credit in certain cases and can be more flexible, because with a reverse mortgage the borrower has the option to repay the loan, Reverse Mortgage providers explain in the article.

There are different perspectives from various financial experts on how to use a reverse mortgage in retirement but there are some facts that everyone should be aware of before taking the leap into a reverse mortgage, U.S. News writes.

Many people are still using a reverse mortgage as a last resort as a way to stay in their home when they’ve run out of funds elsewhere.

“It makes sense if you need the money and have no other sources to stream it from. You have to take care of No. 1, that’s you,” Michael Foguth, founder of Foguth Financial Group in Brighton, Mich., said in the article.

Another thing that potential borrowers should be aware of is that interest rates and closing costs for reverse mortgages can be higher than a traditional 30-year fixed rate mortgage, the article explains. The percentages may actually be pretty close, but the amount the borrower will pay in interest can vary widely.

A perk when using a reverse mortgage is that borrowers don’t have to make monthly interest payments on the loan or on their home, the article notes.

“What makes a reverse mortgage appealing is it doesn’t have to be paid back, which is why many homeowners use them as last resort for income,” the article writes.

The loan is also non-recourse, which means even if the home value drops, neither the homeowner nor the estate is responsible for the difference. But borrowers also need to keep in mind they will still be required to keep up with other payments on the home.

about reverse mortgage - soldSun American Mortgage Company wrote the very first Government Insured Reverse Mortgage in the Southwest over 25 years ago, and they remain an important provider for these effective retirement planning tools even today. 

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Feel free to call them to find out how your retirement can be for fulfilling with a Reverse Mortgage in you plan.  480 832-4343

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Reverse Mortgage Helps Retirees

 

Baby Boomers and senior homeowners have the potential to reshape the nation’s housing market. But as a growing share of this demographic carries mortgage debt into retirement, they will need to seek additional solutions to improve their financial situations. For many, this could mean tapping into home equity through a reverse mortgage, according to a new report from the Department of Housing and Urban Development.

 

The broader housing market has shown positive signs of recovery in the years following the financial crisis, but several challenges remain, especially for older homeowners nearing retirement, according to a report recently issued by HUD’s Office of Policy Development and Research.

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A rising percentage of older homeowners are carrying mortgage debt as they approach and enter retirement. Among owners aged 65 and older, 40% had mortgages in 2014, according to the Joint Center for Housing Studies of Harvard University.

 

The implications of carrying housing debt into retirement years are severe. Not only may these homeowners have to postpone retirement or make difficult decisions regarding lifestyle spending on food, medical care and other expenses, but carrying debt also weakens their ability to draw on home equity to supplement their income as they age.

 

Refinancing options and reverse mortgages, HUD writes, may be appropriate for some older homeowners with mortgage debt, and financial counseling and assistance programs can provide help to those facing financial hardship.

 

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“Older homeowners might draw on their home’s equity to fund modifications that allow them to age in place, help pay for their children’s or grandchildren’s education, or pay medical expenses—and as long as they have the resources to make loan payments, they can reasonably carry mortgage debt,” HUD writes.

 

reverse mortgage - signThe Home Equity Conversion Mortgage (HECM) enables homeowners age 62 and older to convert their home equity into tangible funds that can be used to pay a variety of living expenses, including paying off existing mortgage debt.

 

But although HECMs have undergone substantial changes in recent years that have made them safer products for borrowers, not many eligible homeowners are aware of these new updates, let alone know how a reverse mortgage could supplement their retirement.

 

“The HECM program currently serves a relatively small number of older homeowners, but many more households could potentially benefit from the program,” HUD writes. “Although FHA endorsed fewer than 1 million HECM loans between 1989 and 2015, HECM may be an effective option for some seniors looking to access their home equity.”

 

Want to see if you qualify for a reverse mortgage? Click here to learn more about our reverse mortgage opportunities and call a reverse mortgage specialist today! 480-409-7208

Could this be the right time for a Reverse Mortgage for you?

Could this be the right time for a Reverse Mortgage for you?

The Federal Reserve is taking its time with interest rate hikes, straining the finances of some homeowners 62 and older who depend on investment income. But this slow approach also offers a silver lining for many Americans 62 and older: low interest rates make it easier to generate income from a Reverse Mortgage.

When homeowners take out a reverse mortgage, they receive cash from the lender that represents a sort of advance payment on the equity in the home. The money is generally tax-free, and you can even set up the loan as an equity line of credit, drawing down only what you need.

Lower interest rates can translate into a larger benefit amount: At an interest rate of 5 percent, a 65-year-old homeowner could take out a Reverse Mortgage of up to $270,500 on a $500,000 house. When rates are 7 percent, the maximum would be just $182,000.

For many 62 and older whose home is their largest asset, the difference could be meaningful. The median net worth of householders aged 62 and over is roughly $170,000, according to Census Bureau data. But when home equity is excluded, that figure drops to roughly $27,000.

“There are a large number of households entering retirement that are not going to have sufficient resources to maintain a standard of living and pay medical bills,” said Steven Sass, program director at the Center for Retirement Research. If their “biggest source of savings is the equity in their homes, not their 401(k), and there is a way to access that equity, that seems like a good thing to do.”

With interest rates so low the closing costs for many reverse mortgages can be reduced or waved.  Sun American Mortgage Company wrote the first reverse mortgage in the Southwest in 1989 and is still a leading provider for these wonderful retirement options.

No mortgage payments are ever required under this Government insured program, and, as always, the homeowner is responsible to pay the property tax and the insurance

premiums for their home. Another requirement will require homeowners to meet with a counselor before the benefit can be finalized, and many time this requirement can be conducted on the phone.

People in financial distress have used Reverse Mortgages “to kind of keep afloat,” said Sass. But now, new safeguards have been established that have lead many advisors and researchers to now recommend the Government insured Reverse Mortgage be reviewed by everyone as a potentially important financial planning tool.

Downsizing a home is physically and emotionally difficult for many older people, “and even though a lot of people talk about it, they don’t seem to do it,” said Sass. “A reverse mortgage basically lets you stay in your house.” And that’s a benefit worth looking into for us all.

Sun American has the most experienced staff in the industry to help you evaluate your needs and wants…to see how the Reverse Mortgage can apply to you in your unique set of circumstances.  Please call us today for more information or to schedule a no-cost in-home visit. 

Click here to read more about reverse mortgages: https://sunamerican.com/reverse-mortgage

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Reverse Mortgage Q & A – Get the facts

Reverse Mortgage Q & A – Get the facts

A Few Things You Should Know About Reverse Mortgages

More than 100,000 reverse mortgages were insured last year by the U.S. Department of Housing and Urban Development (HUD). These federally insured loans, also called Home Equity Conversion Mortgages (HECMs), have become more popular as older Americans are looking to tap the equity in their homes so they can age in place.

More than one million reverse mortgages were issued between 1990 and 2015.

Here are some frequently asked questions about these loans.

Q: What is a reverse mortgage?

A: A reverse mortgage is a special type of loan that allows you to borrow against the equity that you’ve built up in your home. You must be at least age 62 to qualify. You can put the money toward anything you like, from paying medical bills to making home improvements. Unlike a traditional home equity loan, a reverse mortgage doesn’t need to be paid back immediately, not as long as you live in your home. That means no monthly checks to write to your lender. The HECM reverse mortgage program is insured by the Federal Housing Administration (FHA).

Q: Can anyone apply for a reverse mortgage?

A: No, you have to be at least 62. You also have to own your home outright or be able to pay off your home with the proceeds from a reverse mortgage. You must live in your home and your home must meet certain criteria according to HUD. Most single-family homes qualify, as do some condominiums, manufactured homes and multiunit structures that meet FHA requirements. 

Q: How do I apply for a reverse mortgage?

A: You can get a reverse mortgage through a licensed reverse mortgage lender. Before you get a reverse mortgage you must have a session with a reverse mortgage counselor, and sometimes there is a fee associated with that consultation. Usually, counseling cost (around $100) can be rolled into the loan. You can receive the reverse mortgage in a lump sum, a line of credit or monthly payments. Reverse Mortgages are available in adjustable and fixed interest rates.

Q: If I take out a reverse mortgage, does the bank own my home? 

A: No, the title remains with the borrower. When your home is sold, you or your estate will need to repay the lender any cash you received from the reverse mortgage, plus interest and other fees. Any remaining equity in the home belongs to you or your heirs.

Q: Do I still need to pay my property taxes and home insurance with a reverse mortgage?

A: Yes. Reverse mortgages are not like regular mortgages in which insurance and taxes are paid out of an escrow account, so you would have to pay those expenses. If for some reason your homeowner’s insurance has lapsed, you will need to reinstate your policy. You also need to be current on any homeowner’s association fees and property taxes.

Q: When do I have to pay back a reverse mortgage? 

A: When you die, sell your home or permanently relocate.

Q: Are reverse mortgages expensive?

A: There can be upfront fees (i.e., mortgage insurance premiums, loan origination fees and closing costs) with Reverse Mortgages but these fees are regulated by the Federal Government; and many times these fees can be rolled into the loan or completely eliminated in certain situations.

Q: What’s the best age to take out a reverse mortgage?

A: Each person is unique in their needs and desires and as such, each individual or each family should review their circumstances with a qualified professional to determine at which age they can more fully take advantage of the Reverse Mortgage.

Sun American Mortgage Company

REVERSE MORTGAGE EXPERTS FOR 25 YEARS!

At Sun American, we produced the first Reverse Mortgage over 25 years ago. Since then, we’ve been doing Reverse Mortgages for individuals all over the great state of Arizona, and now also in Utah, California and New Mexico. See why so many trust Sun American Mortgage Company when it comes to understanding and securing a Reverse Mortgage!

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