More and more cash strapped seniors are looking for reasonable mortgage solutions to their money problems. The most popular loan today for senior citizens is the Federal Housing Administration (FHA) insured Home Equity Conversion Mortgage (HECM) or what is more commonly known as a reverse mortgage. These loans allow seniors who own a single family home or a 2-4 unit home with one unit occupied by the borrower and are over the age of 62 years or older to borrow money against the equity in their property. The special feature that helps these older borrowers is the fact that they can get a loan without the hassle of making a monthly mortgage payment.
These type of loans grew significantly from fiscal year 2012 to 2013. With income becoming smaller and home equity growing larger for many seniors, reverse mortgages are expected to grow at an average rate of 16% over the next several years. It is important to look at the reasons why these mortgages may continue to rise in 2014.
First off, there is an increased elderly population. This population is thought to grow another 10% by 2014 and to be 19% of the U.S. population by 2030. Because of this, these individuals will continue to contribute to the reverse mortgage market in large numbers. Another reason for this reverse mortgage wave is the fact that it is a great way to decrease debt for cash strapped seniors. When the person pays their monthly mortgage payment equity will grow in the home. It goes without saying that the debt they own on their mortgage is going to decrease.
This month was the lowest level of foreclosures since 2005, while home equity exceeded $10 trillion for the first time since 2007. This is massive increase in home equity is one of the reasons why reverse mortgages have become popular in recent years because many senior citizens are using the funds as a way to supplement their income. The Federal Reserve recently reported that new equity in the U.S. housing market rose by $2.2 trillion from the 3rd quarter of 2012 up through the 3rd quarter of 2013, and 2014 should see similar growth patterms. According to a study conducted last year by Integrated Financial Engineering, the HECM Fund’s economic value is projected to grow to $15.38 billion, with insurance-in-force of nearly $161.5 billion by the end of fiscal year 2014. That’s a lot of loans being insured.
Today, the seniors that own homes are going to have a lot more equity in their homes compared to other seniors in the past. The amount of equity in homes has grown more than $117 billion in the last few years. As the real estate market has somewhat stabilized over the years, home values across the nation will continue to go up and it is only natural that the number of home reverse home loans will also continue to increase. These factors combined with a massive increase of seniors who need cash and very low debt will make the number of reverse mortgage rise in the coming years ahead.
For More Information on Reverse Mortgages:
– AARP Foundation, Reverse Mortgage Education Project @ www.aarp.org/revmo 1-800-209-8085
– U.S. Department of Housing and Urban Development @ www.hud.gov/offices/hsg/sfh/hecm/hecmhome.cfm or 1-800-CALL-FHA (1-800-225-5342)
National Association of Reverse Mortgage Lenders www.reversemortgage.org/Home/tabid/63/Default.aspx