It used to be that taking out a reverse mortgage was a means for a person past retirement age to stay home, collect enough to get by and maybe keep their house – the iconic symbol of the American dream – in the family.
Increasingly, however, reverse mortgages are becoming an acceptable loan option for an ever-younger group of applicants.
According to a study released in March by the MetLife Mature Market Institute, the age of those seeking home-equity conversion mortgages, also called reverse mortgages, has dropped since the 2008 collapse of the housing market. It also indicates these loans have evolved into a way for people to cope with paying off sometimes overwhelming debt.
“The age of borrowers is going down,” said Sandra Timmermann, executive director of the Metlife institute. The institute partners with a variety of groups, including the National Alliance for Caregiving and the National Adult Day Services Association to conduct and share research on issues such as aging and longevity.
“Our study looked at people who underwent [education] on the reverse-mortgage process. We interviewed [more than] 21,000 potential applicants but not all of them actually took out a reverse mortgage,” she said. During the 1990s, the typical reverse-mortgage borrower was between the ages of 75.2 and 76.7. In 2010, the average age of these borrowers fell to 73. “We thought they were relatively young, almost half (46 percent) of those people considering it were under the age of 70,” she said.
Twenty percent of the applicants were between the ages of 62 to 64 and represent the leading edge of the baby boomer generation now becoming eligible for a reverse mortgage. The oldest members of this group began turning 62 in 2008.
Nancy Dobie of Bristol was slightly ahead of the curve, getting a reverse mortgage at the age of 62 in 2005, knowing her mortgage was paid in full. For her, it wasn’t a case of eliminating debt; it was a means to remain at home with cash to spare. She represents the growing trend of younger people applying for a reverse mortgage.
“I designed and built my own house in 1985.” she said. “I loved it and knew I wanted to stay there forever. The reverse mortgage has given me financial peace of mind. It has enabled me to keep living here, and I use the extra money to help pay for living expenses. I can enjoy living here without the fear of selling my house, especially in this economy.”