Reverse Mortgages on the Rise

[Apr 28, 2008.]

 

The number of reverse mortgages is once again on the rise.

The Washington Times newspaper is reporting that an increasing number of individuals are turning to reverse mortgages for retirement income.  With reverse mortgages, homeowners draw on the equity in their homes.

The Federal Housing Administration reports that the number of home-equity conversion mortgages has increased an astounding 249% since the year 2005.  Some 107,558 such loans were accessed in the year 2007.  These loans are available only to individuals older than age 62.  With such loans, homeowners can take out a loan that requires no repayment and permits them to continue to live in their homes.  The debt is ultimately repaid when the borrower moves or dies.

Financial experts say that the loans are especially popular with the 34 million U.S. citizens over age 65 who have retired or who soon will retire but don’t expect to receive a large sum in retirement income.

The rise in reverse mortgages should hardly come as a surprise.  To begin with, the nation appears to be experiencing an economic downturn which could lead to a full-fledged recession.  As a result, the nation’s most vulnerable populations, such as the elderly, are now feeling the pinch.

For another, an increasing number of Baby Boomers are heading toward retirement.  These homeowners are more inclined to borrow money than previous generations have been.  Reverse mortgages can be seen as a safe way to obtain extra income during tough economic times.

With reverse mortgages, the day of reckoning can seem far into the future.  Thanks to the nation’s increasing longevity, new retirees can expect to live for a significant length of time after retirement.  As a result, they may view death as decades away, so their reverse mortgages will not have to be repaid for quite some time to come.