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Consumer advocates warn that these borrowers run the risk of depleting their resources early. Homeowners aged 62 to 64 are far more likely to take out a reverse mortgage today than they were in 1999, even though their age means they can borrow less from their home’s equity, according to the report released last month by MetLife Mature Market Institute and the National Council on Aging. The average age of those who have gone through the federally required reverse mortgage counseling was 71.5, the report found, down from 76 in 2000 and nearly 77 in 1990. Twenty percent were 62 to 64, the report said, versus 6 percent in 1999, when the last detailed research was completed. A reverse mortgage allows homeowners 62 and older to borrow against the equity of their homes and continue to live in them without having to make payments, so long as the home remains their primary residence. The interest is added to the loan balance, and the mortgage insurance premium can be added to the loan as well. The loan must be repaid after the borrower moves out or dies. Nearly all the reverse mortgages available today come through the Department of Housing and Urban Development and are guaranteed by the Federal Housing Administration through a program called Home Equity Conversion Mortgages, or HECM. Even though the minimum age for taking out a reverse mortgage has been set at 62, many industry experts feel it is too young. “It’s a bad idea,” said Judith Grimaldi, a lawyer in Brooklyn who specializes in representing the elderly. “You have too much life ahead to encumber your most important asset.” Ms. Grimaldi recalled a New Jersey couple who took out a reverse mortgage in their 60s. Now in their 70s, they have no equity left in their home, which means they cannot afford to move out and buy another. Under HECM-insured reverse mortgages, borrowers must keep current with property taxes and insurance. The loan amount depends on a borrower’s age, the appraised value of a home, the interest rate and whether the rate is fixed or adjustable. “The older the person is, the more they may be entitled to,” said Mario Martirano, a senior vice president of the Residential Home Funding Corporation in White Plains, N.Y. Homeowners who wait until at least age 72 to take out a reverse mortgage will get considerably more, Mr. Martirano said, though he noted that some borrowers cannot wait. They may use a reverse mortgage to dig themselves out of a financial hole, or even to help prevent foreclosure, so long as they have enough equity in the property. “We do a lot of them for foreclosures,” he said. The MetLife research found that two-thirds of homeowners seeking reverse mortgages wanted them as a way to lower their debt levels and help “their often precarious financial situation.” (The MetLife report is based on an analysis of 21,240 counseling sessions by HUD-approved counselors.) Kelly Sabino, the director of the reverse mortgage division of US Mortgage in Melville, N.Y., said, “The majority of people that we see are needs-based clientele” with substantial debts. Ms. Grimaldi said that borrowers may sometimes be seduced by the industry’s marketing of reverse mortgages and not consider less costly alternatives, like a line of credit secured by a home. Homeowners at or near retirement should work with a financial planner or a lawyer specializing in estates to make sure they have a clear plan for the next 20 years of living expenses, Mr. Sabino said. He also urges clients to develop a list of relatives who might be affected by a reverse mortgage. “Let’s get them all together so we can discuss it” and answer their questions, he said.
This article has been revised to reflect the following correction:
Correction: April 13, 2012
An earlier version of this article misstated part of the name of the MetLife Mature Market Institute. It is not “Markets.”
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