REVERSE MORTGAGE INFORMATION
Reverse Mortgage Activity Remains Strong Despite
Declining Property Values
Despite property values falling back to 2005 levels, demand for reverse mortgages continues to
grow at record levels. This is partially attributed to lower interest rates and a significant loss in
the buying power for retirees.
A reverse mortgage enables homeowners 62 and older to convert their home equity into cash.
What makes this type of mortgage so popular is that there are no payments for as long as the
senior homeowner lives in their home.
The U.S. Department of Housing and Urban Development (HUD) reports that 9,564 reverse
mortgages were endorsed in April 2008. This brings the year-to-date total to 64,776, an 8.1
percent increase over 2007.
At the same time, home values in the first quarter of 2008 fell 7.7 percent from the first quarter of
2007 according to a Home Value Report released by Zillow.com. The amount a borrower may receive from a reverse mortgage is determined by their age, the interest rate, and the home value. So, in some cases, a decline in a home’s value may reduce the amount a retiree can receive from the reverse mortgage.
Reverse mortgage growth continues to be strong for a number of reasons including:
• An increase in the demand to supplement retirement income. Each year since
2000, retirees have received an increase in their Social Security benefits lower than
the rate of inflation. Social Security benefits have increased by just 22 percent,
while retiree expenses have risen by 71 percent. Retirees have lost 40 percent of
their buying power.
• Low interest rates have helped to offset the impact from lower home values.
• Property values have not declined in all areas. In fact, some areas of the country
have seen home appreciation.
Unlike traditional “forward” mortgages, reverse mortgages have not been subject to tighter credit
standards. Retirees seeking a traditional mortgage in today’s market may be turned down because
they do not qualify based on credit and income. However, a reverse mortgage does not use credit
or income in qualifying.
Further attraction for the reverse mortgage is the ease and flexibility it provides in customizing the
way funds are received. This includes a lump sum, a line of credit, monthly payments, or a
combination of two or more of these options.
"Funds from the reverse mortgage do not affect Social Security or Medicare benefits," [insert
your name, title at company] said. "Our senior clients have been able to continue to enjoy their
retirement with the peace of mind of knowing they will not outlive their retirement income."
Legislation currently working its way through Congress is expected to result in a substantial
increase in the national loan limit for the FHA-insured reverse mortgage. If passed, it would raise
the limit from $362,790 to $550,000, and would help increase the amount seniors with a home
valued over $362,790 could receive from a reverse mortgage.
For those retirees who already have an FHA-insured reverse mortgage, it’s a relief to know that
the availability of funds from their reverse mortgage will not be affected by a drop in their home’s
value.
To learn more about reverse mortgages visit nrmec.org
grow at record levels. This is partially attributed to lower interest rates and a significant loss in
the buying power for retirees.
A reverse mortgage enables homeowners 62 and older to convert their home equity into cash.
What makes this type of mortgage so popular is that there are no payments for as long as the
senior homeowner lives in their home.
The U.S. Department of Housing and Urban Development (HUD) reports that 9,564 reverse
mortgages were endorsed in April 2008. This brings the year-to-date total to 64,776, an 8.1
percent increase over 2007.
At the same time, home values in the first quarter of 2008 fell 7.7 percent from the first quarter of
2007 according to a Home Value Report released by Zillow.com. The amount a borrower may receive from a reverse mortgage is determined by their age, the interest rate, and the home value. So, in some cases, a decline in a home’s value may reduce the amount a retiree can receive from the reverse mortgage.
Reverse mortgage growth continues to be strong for a number of reasons including:
• An increase in the demand to supplement retirement income. Each year since
2000, retirees have received an increase in their Social Security benefits lower than
the rate of inflation. Social Security benefits have increased by just 22 percent,
while retiree expenses have risen by 71 percent. Retirees have lost 40 percent of
their buying power.
• Low interest rates have helped to offset the impact from lower home values.
• Property values have not declined in all areas. In fact, some areas of the country
have seen home appreciation.
Unlike traditional “forward” mortgages, reverse mortgages have not been subject to tighter credit
standards. Retirees seeking a traditional mortgage in today’s market may be turned down because
they do not qualify based on credit and income. However, a reverse mortgage does not use credit
or income in qualifying.
Further attraction for the reverse mortgage is the ease and flexibility it provides in customizing the
way funds are received. This includes a lump sum, a line of credit, monthly payments, or a
combination of two or more of these options.
"Funds from the reverse mortgage do not affect Social Security or Medicare benefits," [insert
your name, title at company] said. "Our senior clients have been able to continue to enjoy their
retirement with the peace of mind of knowing they will not outlive their retirement income."
Legislation currently working its way through Congress is expected to result in a substantial
increase in the national loan limit for the FHA-insured reverse mortgage. If passed, it would raise
the limit from $362,790 to $550,000, and would help increase the amount seniors with a home
valued over $362,790 could receive from a reverse mortgage.
For those retirees who already have an FHA-insured reverse mortgage, it’s a relief to know that
the availability of funds from their reverse mortgage will not be affected by a drop in their home’s
value.
To learn more about reverse mortgages visit nrmec.org