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Reverse mortgage facts and statistics

Did you know there’s some confusion about reverse mortgages and how they work? In this article, we will share some reverse mortgage facts that might come in handy. 

Reverse mortgage borrowers reported higher financial satisfaction than those who decided against it. 

Good news for seniors who took out reverse mortgages! According to a 2018 study in the Journals of Gerontology, older adults who got a Home Equity Conversion Mortgage (HECM) reported being happier with their finances and housing situation than those who didn’t. The researchers followed up with over 1,000 seniors three to five years after they received HECM counseling. Those who went ahead with the reverse mortgage expressed greater satisfaction than those who decided against it. 

Reverse mortgage borrowers have fewer complaints as well. 

Here’s some encouraging data about reverse mortgages: When looking at mortgage complaints filed with the Consumer Financial Protection Bureau (CFPB) in 2021, reverse mortgages made up less than 1% of the 32,000 total complaints. Traditional mortgages accounted for nearly two-thirds of all mortgage complaints that year. The rest were spread across other types of home loans, such as VA loans, home equity loans, and lines of credit. 

Seniors have substantial amounts of home equity.  

Also, as of January 2023, the National Reverse Mortgage Lender Association determined that seniors have an estimated 11.8 trillion dollars in home equity. That’s a record! 

Wondering how most people use their reverse mortgage? 

In 2021, the Federal Deposit Insurance Corporation found that more than 9 out of 10 seniors who got a Home Equity Conversion Mortgage (HECM) chose to receive their money as a line of credit – either for their full amount or a portion of it. This flexible option seems to be the most popular choice among borrowers. 

A Rich History of Helping Homeowners 

Did you know reverse mortgages have been helping seniors for more than 60 years? The story began in 1961 when a caring banker named Nelson Haynes in Portland, Maine, created the very first reverse mortgage. His customer was the widow of a local high school football coach who needed financial help to stay in her home. 

Since then, Home Equity Conversion Mortgages (HECMs) have grown into a well-regulated program with strong consumer protections. Over the decades, new laws and safeguards have been added to ensure these loans better serve the needs of older homeowners. 

Your Home’s Value is All That Matters   

Here’s one of the most reassuring features of a Home Equity Conversion Mortgage (HECM): you and your family are protected by a “non-recourse” guarantee. Simply put, you’ll never have to pay back more than your home is worth when it’s sold – even if you end up owing more on the loan than the home’s value. 

This gives you and your loved ones valuable peace of mind. If your home’s value goes down over time, the lender won’t be able to come after you or your heirs’ assets to make up the difference. Your home alone serves as security for the loan, protecting you and your family’s other savings and investments. 

Get Expert Guidance Before You Decide  

Before starting your reverse mortgage journey, you’ll have a helpful conversation with an independent expert. The U.S. Department of Housing and Urban Development (HUD) makes sure every borrower meets with a counselor who can explain everything clearly and answer all your questions. Think of it as your opportunity to learn all about reverse mortgages from someone who isn’t trying to sell you anything! 

Say Goodbye to Monthly Mortgage Payments  

One of the most attractive features of a reverse mortgage is that you won’t have to make monthly mortgage payments. However, you’ll still need to keep up with a few homeowner responsibilities: paying your property taxes, keeping your home insurance current, and maintaining your home in good condition. These basic requirements help protect both you and your investment. 

Flexible Ways to Receive Your Reverse Mortgage Funds  

 A reverse mortgage puts you in control of how you receive your money. Here are five convenient options to choose from: 

  • One-Time Lump Sum: Get up to 60% of your available funds right away in a single payment. This can be perfect for handling big expenses or consolidating debt. 
  • Steady Monthly Payments: Receive a reliable fixed payment each month for a period that works for you, similar to a regular paycheck. 
  • Growing Line of Credit: Set up a financial safety net that grows over time – even if your home value doesn’t increase. You only pay interest on the amount you use, and you can tap into these funds whenever you need them. 
  • Monthly Payments Plus Line of Credit: Enjoy the best of both worlds: regular monthly payments for a set period plus a line of credit you can use for unexpected expenses. 
  • Lifetime Monthly Payments Plus Line of Credit: Receive steady monthly payments for as long as you live in your home, along with a line of credit for extra flexibility. As long as you keep up with property taxes, insurance, and home maintenance, these payments will continue. 

Your Financial Safety Net Keeps Growing  

Here’s an exciting feature of reverse mortgage lines of credit that many people don’t know about: your available credit grows over time! When you choose a Home Equity Conversion Mortgage (HECM) line of credit, you get some valuable guarantees, thanks to HUD’s backing. 

You can rest easy knowing that your lender can’t reduce, freeze, or take away your line of credit. But here’s where it gets even better – your available borrowing power increases each year. It grows at the same rate as your loan’s interest rate, minus a small 0.50% annual mortgage insurance fee. 

This growth continues even if your home’s value goes down. Think of it as a financial safety net that gets stronger over time, giving you more flexibility and security for your future needs. This unique growth feature makes the line of credit a popular choice among savvy borrowers planning for their long-term financial well-being. 

So, if you’re looking into reversing your mortgage, make sure to reach out to us at Colorado Lending Team. We’re happy to help! 

 

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