With the increase in the benchmark interest rate, we will see some shift in types of borrowing. For the past two years, with a sustained record low interest rate, borrowing across the board has favored HELOCs and refinances, while home values have simultaneously been favorable toward HECM Reverse Mortgages. Borrowers of retirement age have had to weigh the short and long term pros and cons of loan types for their individual situations. We except a shift back to traditional borrowing to come with interest rate increases.
Because the amount of money available from a HECM Reverse Mortgage is partly based on the value of a potential borrower’s home, these record breaking home values make it a great time for older individuals to tap into that equity, especially using the FHA insured HECM loans. The FHA backing of these loans means even if we saw the housing market make a significant correction in the coming years, the borrower would never owe more than the home is worth at the time the loan comes due. This is unique and incredibly important to many potential borrowers who are weighing their options.
Adding in the increase of the Fed’s benchmark interest rate means traditional borrowing or refinancing will become more expensive and alternatives such a HECM Reverse Mortgages more desirable.
From Reverse Mortgage Daily:
Homeowners aged 62 and older saw their collective housing wealth increase in Q3 2021 by 4% compared to the previous quarter. This constitutes an increase of approximately $396 billion to a record of $10.19 trillion, according to data provided by the National Reverse Mortgage Lenders Association (NRMLA) in conjunction with data analytics firm RiskSpan.
“Survey after survey has shown that one of our biggest fears is running out of money in retirement and having to subsist solely on Social Security,” said Steve Irwin, president of NRMLA in a statement accompanying the latest release. “That’s why housing wealth should be considered with other financial assets when developing a comprehensive retirement plan.”
Last July, the collective senior housing wealth figure topped $9 trillion for the first time. It reached a threshold of over $8 trillion for the first time in April 2021, and previously topped $7 trillion for the first time in March 2019.
Read the full article on Reverse Mortgage Daily here: https://reversemortgagedaily.com/2022/01/14/senior-housing-wealth-tops-10-trillion-for-first-time/
Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado, as well as the Cheyenne and Laramie communities of Wyoming. Contact Jan and learn if reverse mortgage is right for you.