Just about everyone has been affected by the economic downturn and the housing market crash, including—or perhaps especially—older adults. Many Americans are struggling financially and are looking for ways to stay in their homes and avoid foreclosure.
“More than one-half of elder households in the United States have incomes that do not cover their basic expenses,” says Wider Opportunities for Women, an organization dedicated to economic independence for America’s families.
One way to give your budget some breathing room or save your home from foreclosure could be to tap into the home equity you have accumulated over the years. While reverse mortgages aren’t the solution for every situation, they can help give some homeowners the financial security to remain in their homes and afford their monthly expenses.
Older Adults Facing Housing and Foreclosure Crisis
More than 1.5 million people aged 50 and older have lost their homes since 2007, according to AARP, and another 3.5 million homeowners in this age range are at risk.
Mortgage debt has been increasing among older Americans, and many homeowners approaching or even in retirement still owe money on their houses. This kind of debt is growing among 75+ homeowners, says AARP, and their foreclosure rates are higher than those of younger members in the 50+ age group.
On top of housing struggles, many people in or approaching retirement are facing financial difficulties.
Gaining Financial Security Through a Reverse Mortgage
Making monthly mortgage payments can put a strain on households living on fixed incomes, but that could be eliminated with a reverse mortgage loan.
With many people finding it difficult to afford both their homes and their everyday cost of living, some are turning to the Federal Housing Administration-insured Home Equity Conversion Mortgage (HECM) program.
HECM borrowers are required to repay any existing mortgages as a condition of taking out the loan. This can be done with your reverse mortgage loan proceeds, and depending on the amount of equity in your home, you may even have money left over.
Paying off a “forward” mortgage can vastly improve a homeowner’s monthly cashflow, and unlike conventional mortgages, reverse mortgage borrowers don’t have to make monthly mortgage payments. In fact, they’re not required to repay the loan until they sell or leave the home.
In contrast to forward mortgages, reverse mortgages generally do not have minimum credit requirements that borrowers need to meet.
A reverse mortgage is not always the antidote to foreclosure, however. HECM borrowers are required to stay current with their property taxes and homeowners insurance. Failure to do so could result in foreclosure.
Older adults across the nation are facing a housing and financial crisis. If you’re struggling with your day-to-day expenses, or having trouble making those monthly mortgage payments, you’re not alone—and we may be able to help.
Send us an email for more information about how a reverse mortgage could help your situation.