Home equity gives seniors financial leverage

Housing wealth for older homeowners is on the rise nationally, giving them a source of money for late-in-life expenses, according to a mortgage industry group.

The National Reverse Mortgage Lenders Association reported Sept. 29 that homeowners age 62 and older saw their home equity increase by a combined 2.4 percent to $6.42 trillion in the second quarter of 2017.

According to the association NRMLA, the growth in housing wealth for retirement-age homeowners was driven by an $162 billion boost in senior home values and offset by a 0.8 percent increase of senior-held mortgage debt that equaled $12 billion. The quarterly measurement of home equity rose to its higheset level since 2000.

“It is unclear whether Congress and the president will come to an agreement on healthcare reform this year, but there is little doubt that healthcare spending per person will continue to increase. This is a particularly sobering fact for older Americans who can expect to spend between $200,000 to $400,000 out- of-pocket for medical expenses during retirement,” said NRMLA chief executive officer Peter Bell. “The question for them right now is not whether the Senate can pass a bill, but how are they going to pay for the financial shocks of aging? Housing wealth provides older homeowners with an available source of funds to manage the costs of caregiving and other expenses incurred in the last third of life.”

A 2015 research paper from Ohio State University (“Aging in Place: Analyzing the Use of Reverse Mortgages to Preserve Independent Living”) shows that 14 percent of reverse mortgage borrowers took out the loan with the intention of using the proceeds to pay ongoing health or disability expenses. An example, according to NRMLA, ia couple in Maine who used reverse mortgage loan proceeds to pay off aging medical bills, help their adult son, and supplement retirement savings.

The National Reverse Mortgage Lenders Association (nrmlaonline.org) represents the lenders, loan servicers and housing counseling agencies responsible for more than 90 percent of reverse mortgage transactions in the U.S.