Baby boomers: the ideal reverse mortgage candidate?
According to newly-released government data, 32% of Americans aged 65 to 69 are employed—the highest percentage in 55 years.
In addition, 19% of Americans aged 70 to 74 are still working, up from 11% in 1994.
Economists expect even higher rates of working seniors in the coming decades, for reasons that include longer lifespans, rising healthcare costs, and challenges building retirement savings.
Baby boomers and seniors can supplement living costs using a reverse mortgage
For those who don’t want to continue working during their retirement years, the reverse mortgage is a remarkable tool. It can provide additional income which may allow some seniors to retire.
Also known as a Home Equity Conversion Mortgage (HECM), a reverse mortgage converts part of your home equity (wealth) into a lump sum of cash, a monthly check, or a line of credit.
The reverse mortgage doesn’t need to be paid back as long as you live in the home, and you retain the title (ownership) of the home. This means you’re responsible for paying property taxes, homeowner’s insurance, and other expenses.
With Americans 62-and-older having a staggering $6.3 trillion worth of home equity as of June 2017, the reverse mortgage has become a potent tool for certain baby boomers and seniors.
Reverse mortgage eligibility
To be eligible for a reverse mortgage, the following requirements must be met:
- At least one borrower must be 62 or older (In Texas all borrowers must be 62 or older)
- Have approximately 50% or greater equity in your home
- Be able to pay for ongoing property charges including property taxes, homeowners insurance, and HOA fees
- Be able to maintain your home
- Live in the home – if you’re absent from the home for more than 12 months, the reverse mortgage must be paid off
- Receive reverse mortgage counseling from a third party counselor prior to obtaining the loan
Reverse mortgages can benefit baby boomers and seniors in a range of situations
While reverse mortgages aren’t meant for everyone, here are some situations they can be ideal.
- You have extensive home repairs, such as a failing air conditioner or leaking roof
- You need a “rainy day fund” to prepare for unexpected emergencies, medical bills, and investments declining in value
- You enjoy living in your home and don’t want to move
- You want to buy a new home and not have a mortgage payment
- You want to live a more active lifestyle