Mortgage records show that reverse mortgages have often been the most popular among homeowners in their 70s. However, according to a recent report from MetLife Mature Market Institute, a younger generation of baby boomers are starting to capitalize on the loan type.
Reverse mortgages are popular among households on a fixed income, as it allows a borrowers to convert home equity into cash to make monthly payments. The report indicated that the number of borrowers between the ages of 62 and 65 using a reverse mortgage increased 15 percent during the past 13 years.
"Consumer attitudes about reverse mortgages are changing because the recession has eroded confidence about retirement security and Americans will rely more and more on these measures," said MetLife Mature Mature Market Institute director Sandra Timmermann.
Due to recent regulatory changes by the Department of Housing and Urban Development, some lenders will now be performing assessments of reverse mortgage applicants to ensure they can meet the financial requirements. Because of this, experts recommend these borrowers to seek counselling about reverse mortgages prior to risking their home's equity.
Meanwhile, MetLife found that 67 percent of recent counselling recipients would need to make significant repairs to their conventional loan before they would be eligible for reverse mortgage consideration. Additionally, 27 percent say they have outstanding debt that is both housing and non-housing related that could make the reverse mortgage process more challenging.
Since home prices have declined by as much as 30 percent in some areas in the wake of the housing market collapse, the prospect of obtaining a reverse mortgage could be challenging for some elderly homeowners.
"As reverse mortgages do not have income requirements and since other forms of credit have become less accessible, these loans will become more attractive," Timmermann added. "Though it is worth noting that the Department of Housing and Urban Development stated recently that lenders may conduct financial assessments of applicants to ensure that they have the ability to meet their loan obligations."
Despite the growth in popularity for the loan type among homeowners between the ages of 62 and 65, a recent HUD survey showed that the average age at which most homeowners pursue a reverse mortgage is still 73. In contrast, a similar study from MetLife the average age to be much lower at 71.5 years old.