Formerly a loan of last resort, today’s baby boomers are fast turning to reverse mortgages to pay off debt and improve quality of life writes Time online, citing a recent study released by MetLife and the National Council on Aging. The shift, though “somewhat alarming,” can be attributed to several factors, Time says.
“Boomers have always thought differently about their homes and debt,” Time writes. “They moved and remodeled, and they borrowed like no generation in history. Popularizing the reverse mortgage, maligned in the past for high fees and high risks, seems a natural evolution. The good news is that reverse mortgages are now far more consumer friendly, though they are not for everyone.”
Time cites the data in MetLife’s Mature Market Institute study, released last week, indicating that boomers who are in the 62 to 64-year old age group now comprise more than 20% of borrowers today. Acceptance of debt is part of the shift, along with a need for income alternatives, MetLife said.
“Still, the growing interest in reverse mortgages among homeowners under 70 is somewhat alarming,” Time writes. “Age plays a big role in how much money you can get from a reverse mortgage. That’s because the amount is determined by your remaining life expectancy. At today’s rates, a 65-year-old with a $250,000 home that’s free and clear could choose a lump sum or line of credit of $103,000, or monthly payments of $687 for as long as they live in the house. An 85-year-old in the same situation could get $141,000 in cash or a credit line, or nearly double the monthly income.”
Though there are other alternatives for income retirement, the article concludes, “this is a decent option—and you’ll have lots of company.”
Read the Time article.
Written by Elizabeth Ecker