More Ohioans Tap Home Equity Through Reverse Mortgages

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Ohio State University researcher Stephanie Moulton, and Homeport housing adviser Layden Hale say younger retirees are using reverse mortgages to ease financial concerns.(Photo: Tom Borgerding/WOSU news)
Ohio State University researcher Stephanie Moulton, and Homeport housing adviser Layden Hale say younger retirees are using reverse mortgages to ease financial concerns.(Photo: Tom Borgerding/WOSU news)

The federal government says the number of Ohioans taking out reverse mortgages on their homes has more than doubled in the past five years.  Reverse mortgages allow older homeowners to access a portion of their home’s equity. But,  the reverse mortgage’s growth in popularity comes even as seniors see their retirement savings dwindle.

Demographers remind us that with aging of the Post World War Two generation, 10-thousand Americans turn 62 each day.  So, it’s not too surprising that the Fonz, Henry Winkler, shows up in TV ads.

Winkler  – and Barbara Eden of I Dream of Jeannie fame  – are pushing “reverse mortgages.”  And the TV ads can be persuasive.

Eden and Winkler are speaking to their peers. To qualify for most reverse mortage homeowners have to be at least 62 years old, own their house outright or have a small balance left on their mortgage. The reverse mortgage then converts the owner’s equity into a lump sum cash payment, a monthly payment for life, or a line of credit. Repaymet of the loan is deferred until the homeowner dies or the house is sold.

Ohio State University Public Affairs researcher Stephanie Moulton says reverse mortages are aimed at what she calls “cash poor but house rich” seniors.

“So many of these baby boomers are facing retirement age. They may not have sufficient retirement savings and so they’re accessing a reverse mortgage as an alternative. But the problem is or the concern is that we don’t know what that means ten years from now if they’re going to have anything left.”

Moulton says the growing interest in reverse mortgages is about more than demographics. She points to the recession and to the stock market declines.

“Losses of jobs. People or entering into retirement earlier than they had anticipated because they’ve lost their job. So rather than trying to find a job they decide I’m just going into retirement and because of that the reverse mortgage becomes an option much earlier because of this economic climate.”

Moulton adds that current applicants for reverse mortgages are on the younger side of retirees. 20 percent are between the ages of 62 and 64.

And most applicants take a lump sum payment that can top $100,000 depending on the market value of the home. At Homeport on East Main Street, Senior Housing Adviser, Layden Hale says he is seeing more interest in reverse mortgages as financial struggles grow.

“One of the things that we’re starting to see are people who own the homes who are again coming in because they are having problems with their property taxes, having problems making the property taxes.” Says Hale.

And both Hale and Moulton liken reverse mortgages to a bet. For the bank….

“There’s a calculation that tries to determine how long you’re going to be in the home. And the reverse mortgage amount that you receive will be based, in part, on that. Because , again, remember the interest is being added as you continue to live in the home to the balance.” Says Moulton.

“Your bet is I’m going to live a long time. And, like you just said I’m going to outlive it so basically I’m going to get all my money out of that house and then some.” Says Hale.

The Department of Housing and Urban development says the growth in reverse mortgages in Ohio means that homeowners have extracted nearly 2-billion dollars worth of equity from their homes. That’s more than two and half times the amount of reverse mortgages outstanding in Ohio in 2007.

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