The oldest members of the millennial generation will not qualify for a Home Equity Conversion Mortgage (HECM) until 2043, however the housing woes being faced by the cohort could lead many members of that generation to become more “house-rich and cash-poor” than those that preceded it. This is according to a survey released this month by alternative home equity tapping company Hometap.
Millennials are also more likely to have a far weaker understanding of their home equity situations, the study found.
“Millennials are spending the highest percentage of their monthly income on homeownership costs compared to other generations and are at the greatest risk of becoming house-rich and cash-poor,” the company said in an announcement of the survey results. “With real estate values remaining high nationwide, millennials are also the least likely to know how much equity they have in their homes or how to calculate it.”
In a survey of 1,000 U.S.-based homeowners, 47% of respondents’ have seen their finances negatively impacted by the COVID-19 coronavirus pandemic, while 77% carry some form of debt or liability. Additionally, millennials (83%) are more likely to carry debt than their older baby boomer counterparts (72%).
While homeowners generally are not particularly well aware of the options that home equity might be able to provide in retirement, millennials are also generally behind their elders when it comes to understanding their options in this area, the study found.
“Many homeowners do not realize their home provides a source of tappable home equity and are therefore missing out on opportunities to capitalize on their assets, address urgent priorities, and achieve their financial goals,” the survey results said.
While the reverse mortgage industry most commonly serves members of the baby boomer generation, recent product developments have brought the age barrier down. Both Reverse Mortgage Funding (RMF) and Finance of America Reverse (FAR) introduced new eligibility options to their proprietary reverse mortgage products earlier this year that, in some states, will allow borrowers as young as age 55 to get a reverse mortgage loan.
For millennials, that means that older members of the generation will begin qualifying for some kind of reverse mortgage in some areas as soon as 15 years from now, in 2036, presuming such options continue to be offered.
“Hometap surveyed 1,000 homeowners in the U.S. ages 25-75 through AYTM (Ask Your Target Market) in August 2021,” the company said regarding its methodology.
Read the study results at Hometap.