In the first quarter of 2017, home equity held by homeowners 62 and over rose 2.6% to $6.3 trillion, according to data from the National Reverse Mortgage Lenders Association.
This $200 billion increase of housing wealth is attributed to rising home values across the nation, and especially in Colorado where some of the largest spikes were indexed. It is important to note, however, that this was slightly offset by a 0.6% increase in senior held mortgage debt, which is equal to $9 billion.
So, what are the takeaways from these figures?
First, now is a fantastic time for older individuals and married couples to look into a HECM reverse mortgage while home values are up and interest rates are down. One of the factors that determines the amount of funds available through a reverse mortgage is the appraised value of the home – the higher the appraised value, the more funds available. On the flip side, because these loans are FHA insured, if a reverse mortgage is tapped into while home values are high, there is never a concern that more will be owed when it comes time to repay than what the home is worth at that time. This is a comforting guarantee if the housing market were to decline in the future.
Second, the $9 billion increase in senior housing debt signals that older homeowners are not entering retirement mortgage-free at an increasing rate, and/or they are comfortable taking on mortgage debt in retirement. In either scenario, a HECM reverse mortgage should be considered as it may be a viable option. HECM reverse mortgages can be used to eliminate current mortgages – allowing the homeowners to live mortgage payment free. They can also be used to purchase a new home. This is something that all senior buyers should be made aware of while in the real estate market, as they can enjoy their new living situation AND live mortgage payment free.
HECM reverse mortgages are individualized, specialized loans for those 62 and older that allows older adults to tap into the equity of their home while living mortgage and loan payment free. The funds can be accessed via a lump sum, line of credit, monthly installments, or even to purchase a home. Adult children can help their parents plan ahead by working with a reputable reverse mortgage specialist.
Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.