The average age is dropping for borrowers seeking reverse mortgages these days, according to a new study, signaling a generational shift in financial priorities.
Reverse mortgages allow homeowners age 62 and older to get a loan based on the equity in their homes. They can then receive monthly payments, lines of credit or even a lump sum of cash. The advantage of this type of loan for seniors is that they can continue to live in their homes. When they leave the house (or die), the loan must then be repaid, either by the sale of the property or by a payment from the heirs.
“During the 1990s, the typical reverse mortgage borrower was between the ages of 75.2 and 76.7,” according to the study, conducted by MetLife’s Mature Market Institute in partnership with the National Council on Aging as quoted in a US News & World Report article. “Since then, the average age of these borrowers has fallen to age 73 during 2010.”
And those applying for reverse mortgages, but not necessarily qualifying for them, are much younger today as well. All borrowers must go through consumer counseling before participating in a reverse mortgage and the statistics show that in 1999, only 6 percent of applicants were between the ages of 62 and 64, but in 2010, 21 percent of all counseling sessions were with that same age group. There was also a rise in interest among 65- to 69-year-olds as only 17 percent in that age bracket received loans in 1999, but in 2010, 25 percent of the counseling sessions were with that age group.
“The growing interest in reverse mortgages among homeowners under age 70 is somewhat surprising,” the study said. “The amount of loan proceeds that lenders offer to younger borrowers is substantially less than the amount available to borrowers at older ages.”
The shift is largely due to the economics woes of the past four years.
“Consumer attitudes about reverse mortgages are changing because the recession has eroded confidence about retirement security, and Americans will rely more and more on these measures,” said Sandra Timmermann, director of the MetLife Mature Market Institute as quoted in a New York Times blog. “As reverse mortgages do not have income requirements and since other forms of credit have become less accessible, these loans will become more attractive.”