Attitudes toward reverse mortgages have changed in recent years, according to a report by the MetLife Mature Market Institute, moving from a way older homer owners enhanced their quality of life to one in which they use those loans to deal with financial needs including reducing their debt load.
In recent times, largely due to the economic situation, people are taking out reverse mortgages at a younger age, now just above age 71 on average, with nearly half under age 70. Twenty-one percent are at the minimum age of 62 or within a year or two older, compared with just 6 percent who took such loans at age 62 in 1999. And about two-thirds of all reverse mortgage borrowers have an existing home loan, with a quarter having both housing and non-housing debt.
“By refinancing with a reverse mortgage, borrowers can defer making principal and interest payments on their existing home mortgage until they move out of the home. Borrowers must also meet all of their other reverse mortgage obligations including making timely property tax and homeowners insurance payments. This may provide immediate relief and help to stabilize a difficult financial situation. For older homeowners with sizable debt, a reverse mortgage may be the only way they can retire,” it says.
However, that approach carries risks if the borrower draws down home equity too quickly and/or doesn’t control current spending, it added.