Pat Hune, Broker, 1st Southwest Realty, and Various Sources, November 2019
There are approximately 10,000 Baby Boomers retiring everyday. The number sounds astounding but according to an article by Glen Kessler in the Washington Post the number is correct. Here is what Glen said: “Ten thousand people a day is certainly a big number. Over 365 days, that’s almost 4 million people. But then everything about the “Baby Boom” generation is pretty big. There were 76 million people born between the years 1946 and 1964, the traditional window for the baby boom generation. That means that they will retire over a 19-year period. Simple math shows that 76 divided by 19 is 4 million, or almost 11,000 people a day. While a certain percentage will die before they reach retirement age, analysts say that immigrants will actually boost the number of potential baby-boomer retirees to nearly 80 million —and not everyone retires exactly at 65 or 66. Some baby boomers likely retired at 62. So let’s say it’s 80 million over 20 years—which still yields 4 million a year.”
A lot of the Boomers do not want to leave their homes. These Boomers have equity in their homes but not enough monthly income to cover living expenses. One option for these Boomers is a reverse mortgage. Reverse mortgages were developed in 1961. The purpose was to give the homeowner the ability stay in the house while increasing their monthly income by using their equity.
The important thing to remember about a reverse mortgage is you no longer own the house. However you are still responsible for property taxes and maintenance. Does your home have a lot of deferred maintenance? Do you have significant cash reserves to replace a roof, plumbing or heating/air conditioning unit? If the answer is no then a reverse mortgage may not be right for you. You should also discuss the situation with you heirs especially if they are counting on inheriting the house when you die.
I was never a fan of reverse mortgages as the upfront fees were very high. However in its 53 years from its birth in 1961 to present day, the reverse mortgage terms have changed significantly and are continually improving.
The terms and conditions of a reverse mortgage is fairly complicated and too long for this newsletter. To determine if a reverse mortgage is right for you it is important to find an experienced reverse mortgage professional. If you are thinking about a reverse mortgage please contact me for a referral. The bottomline, as with any big financial decision, is do your research.
Here is a link to the history of reverse mortgages.