The HECM program (home equity conversion mortgage aka reverse mortgage) was voted into existence in 1988 and the first loan was completed in 1989. It is regulated by HUD and insured by FHA.
According to a report from Harvard University’s Joint Center for Housing Studies, as of 2010, “40 percent of households 65 and up were still paying a mortgage.” In 1992, according to the report, there were only about 18 percent over 65 with mortgage payments.
The CFPB says that housing related costs exceed 30% of household income on over half of homeowners 65 and older with mortgage debt, putting them at greater risk for financial harm.
According to a recent report by the Social Security Administration, benefits will need to be cut by 23% in aggregate in 2033. According to a survey by AARP, 23% of those 65 and older in Oregon, Social Security is 90% or more of their household income.
The National Council on Aging found one third of senior households have no money left over at the end of the month or is in debt after meeting essential expenses. In the same survey, they found one in four senior households that had credit card debt, had a balance of at least $7,200 in 2013.
A survey completed by BlackRock in 2015 found that Boomers, aged between 55 and 65, wanted an annual retirement income of $45,000. However, the average retirement nest egg was $136,200 which would only provide an estimated annual income of $9,129.
The Insured Retirement Institute found that 60% of Baby Boomers believe their retirement will cover basic expenses and some travel and leisure, yet only 55% have retirement savings.
Bankrate.com survey shows the two biggest fears in retirement are health care expenses and running out of money. Fidelity Investments estimates that a couple that retired in 2014, will need $220,000 to cover health care costs in retirement.
Statistics from Census.gov show that 79.5% of those 65 and older own a home.
Only 46 percent of Boomers think it is very or somewhat important to leave money to heirs, as compared to 63 percent who believed this was important five years ago. This indicates that as Boomers move closer to, and into retirement, they are discovering it may not be realistic to plan to leave money to heirs, based on a study from the Insured Retirement Institute.
A reverse mortgage can be the saving grace for many seniors during retirement. It can free up cash flow by getting rid of their mortgage payment or paying off debts. Using proceeds to supplement their retirement can make their nest egg last longer. It can be used to delay claiming social security. It can create peace of mind knowing they have access to funds if they ever need it.
There are really only a handful of reasons that I have come up with where a senior homeowner should not get a reverse mortgage which are they need short term access to funds, they are planning on moving in a short period of time, they have a gambling problem, they have family members leeching off them or they have money management problems.
Unfortunately, the reverse mortgage has received a bad rap from the media for a long time and many myths and misunderstandings still shroud this amazing product.
If you have questions about reverse mortgages or would like an analysis give me a call at 541-773-3131 or fill out the form on the right and I will get back to you.
I work with clients all over Oregon including Portland, Eugene, Salem, Medford, Grants Pass, Corvallis, Klamath Falls and the Oregon coast.