Just under 20% of seniors who responded to a recent survey were unaware of reverse mortgages — despite showing an overwhelming desire to stay in their homes and potentially make renovations into old age.
Among homeowners aged 60 to 70, 44% said they would keep a mortgage through retirement, according to a study on retirement and mortgage debt conducted by American Financing, an Aurora, Colo.-based mortgage consultancy. A significant portion — 16% — said they might never end up paying it off, with the largest chunk of respondents estimating that the process would take more than eight years.
Still, 19% said they did not know what a reverse mortgage was, while 63% said they believed their savings could cover renovations to their homes that would allow them to age in place.
“Yet one question needs to be asked: How will these individuals afford to remain at home and make modifications if they run out of savings when nearly half (48%) of those surveyed reported being unsure of what they would do in the event that retirement funds ran low?” the report noted.
American Financing pointed to rising property values and home equity levels as reasons why seniors might choose to explore a reverse mortgage, and advocated for additional education among lenders about the products.
“Ultimately, reverse mortgages can present a viable option to help eligible individuals with limited income use the accumulated wealth in their homes to cover basic monthly living expenses, ensuring that their savings will last longer into retirement,” the firm pointed out.
The company isn’t the first to note lack of consumer awareness about reverse mortgages: Earlier this year, the Urban Institute released a report that blamed a variety of factors for underutilization of home equity in retirement, from misinformation about the risks and costs to the lack of name-brand banks in the marketplace.
In addition, Reverse Mortgage Funding rolled out an ad campaign that saw average consumers taking a “blind taste test” between reverse mortgages and home equity lines of credit; the focus-group participants overwhelmingly chose the Home Equity Conversion Mortgage product when they were told of its features but not its name.
Editor’s Note: Due to an editing error, an earlier version of this story incorrectly stated that only about 20% of respondents knew what a reverse mortgage was in the opening paragraph. RMD regrets the error.
Written by Alex Spanko