The amount of home equity being held by potential age-qualified reverse mortgage borrowers now totals more than $6 trillion, an increase of $164.9 billion in equity in the fourth quarter of 2015, according to the latest Reverse Mortgage Market Index (RMMI) from the National Reverse Mortgage Lenders Association and RiskSpan.
The increase in home equity was largely driven by an estimated $169.7 billion gain in the aggregate value of homes owned by adults aged 62 and older, though this was offset by a $4.9 billion increase in mortgage debt held by this age group.
As a result, the gains in equity pushed the NRMLA/RiskSpan RMMI to a new all-time high of 209.12 in the first quarter of 2016—up from the previous high of 203.37 at the end of 2015.
“Until recently, it seemed unthinkable that anyone would carry a mortgage into retirement, but today millions of homeowners are still making monthly payments after leaving the workforce,” said NRMLA President and CEO Peter Bell in a written statement.
While this phenomenon is not necessarily a bad thing, Bell suggests that seniors who are looking to accelerate the payoff date may want to consider using the proceeds from a reverse mortgage to satisfy their existing mortgage debt.
But there are still some misunderstandings that remain regarding mortgage debt and reverse mortgage eligibility.
“There are some misconceptions that an applicant would need to own their home ‘free and clear’ to qualify for a home equity conversion mortgage, but this is not the case,” Bell said.
Written by Jason Oliva