Reverse Mortgages Right for a Changing Market

The average age of Americans is rising quickly, and this sheer fact has several implications for the mortgage industry. One implication is that there will be a growing demand for borrowing home equity. A reverse mortgages is one option, which allow older homeowners (55 years and up) to tap into the home equity in their homes without having to sell the home and without a mandatory monthly mortgage payment. Keeping in mind that property taxes and homeowner’s insurance must continue to be paid as usual.

Another implication is that there will be a need for more education and outreach about reverse mortgages, as some people are not aware of this home equity borrowing option.

Additionally, the mortgage industry will need to adapt to the changing needs of older borrowers, such as offering more flexible repayment options.

The aging of the American population is a significant trend that will have a major impact on the mortgage industry. Leaders will be prepared to meet the needs of this growing population in order to remain competitive.

Adapting to demographic pressure

The U.S. population is aging, and the number of people aged 65 and older is projected to grow from 56 million in 2020 to 94.7 million in 2060, an increase of 120%.

The first factor that is contributing to this is the massive group known as the Baby Boomers. The baby boom generation is the generation of people born between 1946 and 1964. This generation is now entering retirement age. Some Gen Xers are quickly approaching retirement as well.

As they do, medical science says they will live longer than the generations that came before them. Advances in both medication and healthcare are ensuring this, not for every Boomer, of course, but for most.

A second factor that speaks to the changing needs of the American population is the increase in diversity. The U.S. population is becoming more diverse, with the Hispanic population growing at the fastest rate. This group is projected to make up 28% of the U.S. population by 2060.

The other factor that should be considered is that, as a rule, the U.S. population is becoming more educated, with more people completing college. The college-educated population is projected to grow from 40% in 2020 to 52% in 2060. These people understand their financial options and they’ll seek out new loan products to meet their needs.

Preparing to serve a fast-growing demographic

The aging population is adding new senior citizens at a rapid pace. The number of people aged 65 and older is projected to increase by 39 million between 2020 and 2060. This increase will have a significant impact on the U.S. economy, healthcare system, and social security system.

But it could have one of the most significant impacts on the mortgage industry. As more people approach retirement age, there will be more and more people who may be interested in a reverse mortgage as a way to tap into their home equity.

With home prices still on the rise, homeowners have more equity to tap. Plus, average mortgage payments and cost of living are on the rise. This makes reverse mortgages more attractive, as borrowers can borrow their own home equity without incurring more monthly expenses.

Finally, there is some evidence that the job market is cooling, which will have a positive effect on reducing inflation. Some have predicted that this will prompt the Fed to stop raising interest rates, which will make it possible for reverse mortgage borrowers to tap even more of their home equity.

There is more education and awareness about reverse mortgages now than there was in the past. This means that more people are aware of the potential benefits of a reverse mortgage and are more likely to consider it as an option for retirement income planning or as a safety net.

Add in the fact that the Mortgage Cadence MCP LOS can originate both forward and reverse mortgages and it makes sense for lenders to take a good look at these loan products and consider adding them to their menus.

We have seasoned reverse mortgage experts who are happy to visit with you about this opportunity for your lending business.

By George Morales, Reverse Mortgage Product Manager at Mortgage Cadence 

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