Why Borrowers Take Reverse Mortgages

Reverse mortgage borrowers are increasingly getting younger according to a recent report by the MetLife Mature Market Institute and the National Council on Aging. Additionally, borrowers are using reverse mortgages for different purposes today versus several years ago.

Younger borrowers are using the loans to pay off debt more than in the recent past, the study shows, with the breakdown as follows.

Chart: Reverse Mortgage Uses – MetLife MMI

Tags: Reverse Mortgage Uses - MetLife MMI

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“Among those who received HUD-approved counseling for reverse mortgages in 2010, 67% indicated they wanted to lower household debt, while only 27% were doing so to enhance their lifestyles,” the report states. “About two-thirds of those receiving reverse mortgage counseling have a conventional mortgage that will need to be repaid if they decide to take a reverse mortgage.”

View the full report.

Written by Elizabeth Ecker

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  • The influences are not just because of age alone.  

    In September through November 2010 when the information was taken, the greatest segment of seniors who were suddenly helped by new PLFs (Principal Limit Factors) were younger seniors.  Also Savers had just come out and generally younger seniors are the most receptive to new ideas among seniors as a whole.

    Next we also know that the percentages of seniors under 70 have changed considerably since 1999 especially after the first Boomers began turning 62.  Also there was a drastic reduction in endorsements in that three month period over what they had been in prior years.  They were dropping not going up.

    The financial situations of younger seniors were much different in 2010 than even in 2007.  Home values were not growing and the ratio of mortgage balances to home values was going up.  The unemployment rate was moving up and long-term unemployment was a persistent issue even for politicians who promised to cure or at least mitigate it.

    More important than the fact that things were different in the three month period under consideration is what caused them and why, things which were generally overlooked in the study.

  • I think that this is a reflection of the economy.  More and more people are reaching 62 but aren’t in the position to retire yet.  Therefore, looking at the stats above makes it pretty clear that ‘paying off debt’ is the reason this younger generation of reverse mortgage borrowers are taking the loans out.

    The real concern about this trend is what is going to happen over the next 10-20 years.  Will these people run out of money?  Have to work longer?  Be able to retire with dignity?  Only time will tell.

    Warm Regards,

    Tony Rovere

  • Times have changed and still are changing, no doubt about that! Paying off debt is a reason younger borrowers are taking out a reverse mortgage. Many seniors that are in that 62 and 66 year old range find themselves in a position they were not planning to be in.lets look at what has happened when you compare 1975 to present day 2012. In 1975 the American dream was to own a home, pay it off when you retired, hopefully retire at age 60 and live the life of Reilly. Things did not turn out that way, did they!

    Today at age 62 or 64 retirement may not even be in the cards anymore. A senior at age 63 may just have been laid off from his or her job, lost a majority of their retirement plan and is looking for a job. They have a mortgage payment, an auto loan, credit card debt and maybe medical bills. A reverse mortgage in this case becomes a last resort loan. They take out the loan to buy time and eliminate their debt as much as possible.

    Another scenario may be a 62 year old, still working but finds that he or she can’t retire but also can’t work as hard and as many hours in a week as they used too. Lets say this senior owns a home but the existing debt on the home is not that large, they take out the reverse mortgage. They pay off the existing loan, do some remolding on their home, pay off an auto loan, buy another new auto, take a long awaited vacation and put the rest of the money in a safe investment for a security blanket. Sound familiar? This senior may have faced reality and has come to grips with never being able to retire. What they did dowas just made life a lot easier to cope with.
    Today the young are taking out reverse mortgages for different reasons than they used to and the number of younger borrowers have come up to the plate for some of the reasons I just mentioned. As Tony said, only time will tell, only time will tell if the scenario will be changing again?John A. Smaldone

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