Reverse mortgages are poised to become a more mainstream financial product in the coming years, with some industry stakeholders expecting a rise in popularity as consumer attitudes shift, says a recent MarketWatch article.
Currently, reverse mortgages aren’t popular among clients of Northbrook, Ill.-based financial advisor Steve O’Hara. That’s due in large part to people’s desire to hold onto their housing equity and a common view of the product as a “loan of last resort.”
“If you go up to almost anyone and say ‘Would you or your parents use a reverse mortgage,’ the average senior or heir would say ‘That’s not for me, that’s for someone in a crisis situation,’” Colin Cushman, chief executive of Generation Mortgage, told MarketWatch.
“Some homeowners may be forced to reshape their opinions on reverse mortgages,” says the article. “As people live longer due to medical advances, more of them may need to get at their home equity to pay for their medical costs.”
Another factor: Many older Americans have significant wealth in the form of home equity, MarketWatch continues, and low- and middle-income households are especially likely to have their wealth concentrated in their homes.
“It’s a tremendous safety net. People today who would tell you they’d never want to use [a reverse mortgage]; 10 years from now, some will have to use it,” O’Hara said.
While the product could be increasingly used as a retirement safety, some say it could also grow as a strategic retirement planning tool.
“Over the past year or two, a few articles have been published in the Journal of Financial Planning and other professional publications suggesting that reverse mortgages have a place in a comprehensive approach to personal financial management for retirees,” Peter Bell, CEO of the National Reverse Mortgage Lenders Association, told MarketWatch. “There are a few different approaches advocated by different planners, but essentially they all boil down to strategies to preserve the duration of assets through retirement.”
In 2013, nearly 60,100 reverse mortgages were originated, according to FHA data. “But while retirees may currently know only one person with a reverse mortgage today,” says MarketWatch, “there may come a time when they know 20.”
Written by Alyssa Gerace