According to a study recently released by Fannie Mae, more baby boomer retirees have mortgage debt than those retirees who were born between 1931 and 1935.
“Paying off the mortgage, once a widespread rite of passage for homeowners approaching retirement has become less common in recent years,” wrote Patrick Simmons, director of strategic planning for Fannie Mae’s Economic & Strategic Research Group.
“The relatively high incidence of housing debt among boomer homeowners has the potential to strain their retirement finances,” Simmons wrote. “Given that income typically declines in retirement, monthly mortgage payments could stretch the household budgets of boomers who exit the labor force without first extinguishing their housing debts.”
Many of those boomer retirees turn to a reverse mortgage to eliminate their mortgage payments as they enter retirement. While property taxes and homeowners insurance must continue to be paid, the removal of an often-substantial mortgage payment allows homeowners to ease the pressure of stretched financial obligations.
With less outgo comes a sigh of relief, as retirees may be able to delay taking social security until age 70, pay off high credit card debt, allow time for the retirement portfolio to grow, and find a myriad of other uses for tax free proceeds of a reverse mortgage.
Recent changes to the government insured Home Equity Conversion Mortgage (Reverse Mortgage) program by HUD have reduced the amount of mortgage insurance paid annually, thereby slowing the growth of the loan balance over time.
Contact your local Reverse Mortgage Specialist for details specific to your situation.
This article originally appeared in the August 2019 issue of PrimeTime Seniors.