Reverse Mortgages Are Often Used To Retire Debt

6/19/2008

posted by N. Sioris

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According to an AARP survey, reverse mortgages are frequently used to payoff an existing mortgage and/or other non-mortgage debt. In recent years, there has been an increase in the number of older people that continue to carry mortgages and other consumer debt well into their retirement years.

Reverse mortgages are often used as a vehicle to supplement income indirectly. By using reverse mortgage proceeds to retire existing debt, you are freeing up income that would otherwise be used to make payments on your current mortgage or other consumer debt. Retiring current debt in this way has helped many older homeowners avoid foreclosure or bankruptcy.

47% of the respondents to the AARP survey reported having a mortgage balance on their homes. 28% of the respondents identified the need to pay off non-mortgage debt as a reason for looking into a reverse mortgage.

Three of the often mentioned reasons cited by the participants for looking into getting a reverse mortgage pertain to supplementing income. 47% said they need extra money for everyday expenses. 71% cited, improving the quality of life by being able to afford some extras, and 75% of the respondents mentioned having more money available for emergencies or other unexpected expenses.

Another part of the survey included responses from borrowers who had all ready obtained a reverse mortgage. When asked if their reverse mortgages had met their financial needs, 58% indicated that the loan had completely met their needs. 25% said the loan had mostly met their needs, and 12% said their needs had been partly met. Only 2% said that their needs were not met and another 2% said that it was too early to tell. For the majority of the people that said their needs were only partly met, the common reason given was that the loan did not provide enough money.

When asked about specific positive impacts as a result of getting a reverse mortgage, the most often cited results were:

1. Peace of mind
2. Helped them have a more comfortable lifestyle
3. Improved their quality of life
4. Helped them to remain at home

More AARP educational material about reverse mortgages can be found here.