Improving reverse mortgage financial literacy, reducing borrowing costs and expanding product options are among a list of recommendations put forth by the Urban Institute to help ease barriers to home equity extraction in new study titled “What’s stopping seniors from accessing the wealth stored in their home equity?”
“Seniors are sitting on a mountain of housing wealth. Homeowners ages 65 and older could access more than $3 trillion in extractable primary residence home equity, but only six percent of senior homeowners are interested in tapping into their home equity to help meet retirement financial needs,” according to the study’s authors, Karan Kaul and Laurie Goodman (who discussed some of her initial findings at NRMLA’s 2016 Annual Meeting in Chicago). “At the same time, nearly 37 percent of senior homeowners are concerned about their financial situation in retirement.”
Aversion to debt and continued improvements to health and medicine are allowing more seniors to work and earn well into old age, reducing the need to depend on home equity extraction, the authors added. To help reverse the trend, the Urban Institute proposed improving reverse mortgage financial literacy by introducing the product to people at a younger age.
“This could be achieved by incorporating housing wealth and reverse mortgages into retirement planning,” said the study. “Reverse mortgage literacy might also be improved through enhancements to the Federal Housing Administration’s HECM counseling efforts, via customizing counseling based on the potential borrower’s characteristics and financial needs and by starting counseling earlier in the borrowing process.”