Growing Popularity Of Reverse Mortgages

December 18, 2007

Major changes are taking place in the reverse mortgage industry. And with its rapid growth during the past year or so it certainly has become an industry. First, a basic definition: A reverse mortgage is a loan against the equity in the home owned by a senior individual or couple. In most cases the owner(s) must be at least 62 years of age. The loan provides monthly income for the owners, usually for the rest of their lives, or until they sell or move from the property. It can also be taken as a lump sum, line of credit, or combination of those options.

For years there have been three primary reverse mortgage plans available, the most popular being FHA’s Home Equity Conversion Mortgage (HECM). The reverse mortgage concept has become more popular in recent months and years with senior homeowners. This has motivated many of the nation’s large banks and mortgage lenders to start offering reverse mortgage products. Some of those lenders are trying to edge out competitors by lowering their fees and increasing their payouts. One lender has reduced the minimum age requirement to 60. Others are making loans on second homes, and are offering "jumbo" reverse mortgages for high-end homes valued up to $10 million.

The key reasons for the growing activity in this area are two-fold. First, cost of living that continues to grow while seniors are often living on fixed incomes. They need the extra monthly income to meet their rising financial needs. Also there is a growing number of senior homeowners, with "baby boomers" now reaching retirement age. These factors raise the antennas of banks and lender firms. Before you start calling in representatives of firms selling reverse mortgages, discuss it with a friend, attorney or a trusted financial advisor. Be sure it’s the right step for you.

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