A recent study by TransUnion observed the changing trends of U.S. borrowers. It showed that older borrowers have higher loan balances today than they did in 20051. The study focused on consumer wallet share: the types and amounts of loans that people need and have at different life stages. The main timeframes the study focuses on are before the recession in 2005, during the recession in 2009, and after the recession in 2014. The age groups studied are those ages 20-29, 30-39, 40-49, 50-59, and ages 60 and older.
Interestingly, those 50 years old and older reported a 22% increase in open loans of any type since 2005.2 This includes all forms of loans from credit card debt, to car loans and mortgages. Those in the 20 year old to 49 year old age range reported a decrease of 15% in open loans during the same period. The study also found that the recession did not affect each age group equally1. Those aged 40 – 60 years old and up reported having a higher total loan balance today than they did in 2005.
The only group to increase their mortgage wallet share is the 60 years and up group. Mortgages made up 71.5% of their wallet share in 2005. In 2014, that increased to 76.3%. During that time, their mortgage amount average increased from $115,785 to $160,1204. For senior homeowners who may be considering retirement in the near future, an increased mortgage amount can be an overwhelming obstacle.
One of the main summary points discussed in the study is that the highest overall loan demand is from the 60 years old and up age group. This is concerning because many people in this age group are either in retirement or may be contemplating retirement in the coming years, resulting in lower income.
For many homeowners, retirement may stretch an already tight budget. Medical costs, home repairs, and the rising cost of living could become a burden. Instead of selling their home, or cutting costs even further, there may be another option. For homeowners who are at least 62 years old and who have built up significant equity in their home, a reverse mortgage loan could be a good financial option. Reverse mortgage loans enable borrowers to access a portion of their home’s equity to obtain tax free5 funds without having to make monthly mortgage payments6.
Reverse mortgage borrowers can receive their loan proceeds in a lump sum, monthly payments or as a line of credit. They may use the funds however they choose, such as making home repairs and updates, or to simply make retirement more comfortable. Homeowners can also save the funds for a rainy day or have the comfort of knowing the line of credit is available, even if they don’t plan on using the funds immediately.
For more information about reverse mortgage loans or to see if you qualify, call 800-976-6211.