As the baby boomer generation settles into their golden years, many are turning to the convenient option of a reverse mortgages for retirement to help them secure their retirement years.
In recent years, the reverse mortgage market has once again become healthy, after experiencing a brief fallout during the housing crisis of 2006. Not it’s healthier and stronger than ever before, and with newer laws in place to protect homeowners, it’s become a more viable retirement vehicle.
Recent studies have found that a large percentage of retirees lack the funds necessary to retain a stable retirement lifestyle. But they all, for the most part, share a commonality: they have most of their home paid off. With a reverse mortgage, they are able to tap into this equity and use it to fund their retirement or pay any other expenses along the way, such as medical bills or even vacations.
A report by Mortgage Finance magazine revealed that in 2014, homeowners took out over $15 billion in reverse mortgages nationwide. This represents a 20% increase from 2012, but is still short of the record year of 2009, when over $30 billion in reverse mortgage loans were issued.
As an estimated 77 million baby boomers near retirement age, reverse mortgage demand will increase. Experts say that about 10,000 boomers reach the age of 65 every day in the U.S., and that about 48% of them lack the necessary funds to retire with stability. Of those mentioned in Mortgage Finance magazine, it was found that almost 60% have $100,000 or less funds set aside for retirement.
An Ocwen Financial Corp financial outlook report found that the reverse mortgage market is could be worth $2 trillion and growing over the next five years, easily trumping the estimated $90 billion that it’s worth at the present.
Homeowners, under new laws, are able to borrow as much as 60% of the value of their homes under the new rules. Given that the average home has at least $110,000 in equity in the U.S., and that most boomers have their homes nearly paid in full, it could mean that millions of people have access to a large surplus of funds to help them pay for their retirement and enjoy a worry-free future.