In order to understand why the reverse mortgage has become so popular, it helps to understand today’s seniors. Recent surveys of the Baby Boomer generation, those who are 45 to 63 today, indicate that the Boomers are no longer young, but youthful, and will do everything in their power to delay becoming and feeling old, and are generally being dragged into old age kicking and screaming.
Another survey found that almost half of those 65 to 74 consider themselves to be just middle aged, and of those 75 and older, about a quarter still consider themselves to be middle aged! And, no wonder: we know that if we reach the age of 60 today without cancer, stroke or heart disease, 9 out of 10 of us will live to be over 100.
The bottom line is that we want to be able to finance the activities we love to do because we don’t think we’re old, but we are concerned about outliving the money we need to take care of ourselves.
The issue is that, not counting the home, the average net worth of a 75 year old today is $65,000 – not enough. Where will we get more money: home equity loans to the rescue? Not so fast – you may not qualify financially for the loan and, even if you do, you are going to have monthly payments. And, if you do qualify, it is possibly because you don’t really need the money!
So, reverse mortgages to the rescue – still, as far as I know, the best way to solve this dilemma. The first reverse mortgage ever made in this country was made in 1961 by Nelson Haynes of Deering Savings and Loan in Portland, Maine, to Nellie Young, the widow of his high school football coach. Since then, the concept has become a standard and valuable tool for financial planning for the aging population. The modern FHA insured Home Equity Conversion Mortgage (HECM) gives people over 62 access to their home equity with no financial qualifications, and without making any monthly payments as long as they live in the home. Over 100 thousand per year are made.
