Smart Borrower Blog

Reverse Mortgages Draw Younger Crowds

Oct 26th, 2011 @ 7:04 PM by Amber Nelson

A rising population of baby boomer retirees are changing the landscape for reverse mortgages. These loans that have historically appealed to older, single homeowners are now garnering more attention from the youngest qualifiers.

The average reverse mortgage applicant today is around the age of 62 or 63, according to Peter Bell, president of the National Reverse Mortgage Lenders Association (NRMLA) as quoted in a Reuters article. And whereas older widowed women were the major borrowers about 15 years ago, now mortgage companies are most likely to see boomer couple applying for the loans.

A reverse mortgage is a loan against the equity of a home and it is typically not due until the home is sold.

Hard economic times, coupled with many baby boomers’ lack of retirement savings have made these loans much more popular with the younger crowd. According to Bell and the Reuters article,

“They use them as a transitional way to fund retirement, living off of reverse mortgage income during the early retirements and then selling their homes, paying off loans and downsizing later.”

It has been estimated that the boomer generation holds half of its net worth in home equity, but even that value is shrinking in today’s economy. The NRMLA found that seniors over the age of 62 had a total of $3.14 trillion in home equity as of the second quarter of 2011. That may sound like a lot, but that represents a 2 percent decline from the previous quarter and the lowest overall value since the second quarter of 2004. And with home prices predicted to continue falling through next year, retirees may have less and less equity to tap.

Borrowers should definitely be careful as they sign up for a reverse mortgages today. There can be lots of upfront fees and complex terms. There may be better options for younger couples, like regular home equity loans.

It is perhaps telling that two of the nation’s biggest reverse mortgage lenders, Bank of America and Wells Fargo, have now exited the scene. Falling home prices and decreased profitability made them unpalatable to those banks, and as Wells Fargo said in a statement, reverse mortgages were “designed in a different economic time.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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