Opinion: Why Are Gen Xers Preferring Reverse Mortgage Products?
into the loan balance, and it does not require them to pay anything upfront.
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everse mortgage products are becoming popular among Gen Xers; people born between 1961 and 1980 and represent 20 percent of the population. So popular that the loan generally offered to homeowners that are 62 or older has seen some financial institutions lower their age requirement to 55. But before we analyze why this type of loan has gained popularity, let us address what it is. According to Investopedia. com, this is a loan offered to homeowners that are 62 or older. The homeowner must own the home, meaning that the house is fully paid for. If the 140 l
home has considerable equity, the homeowner can ask the bank to loan them money as tax-free income. Unlike a forward mortgage, the kind that most of us use to pay for our homes, the bank does not require the person to make any monthly loan payments. Instead, the financial institution disburses money to the homeowner every month, in a lump sum, line of credit, or term payments, hence the term “reverse” mortgage. In a forward mortgage, a person must make a down payment with the lender. In the case of a reverse mortgage, the homeowner’s interest is rolled
In the event a homeowner dies, the home will be sold, and the proceeds will be used to cover the loan principal. However, the homeowner is required to pay back the money once they die, sell the home, or move permanently. In which case, the house acts as collateral; only the homeowner holds on to the title until they are ready to pay off the loan. The loan is structured so that the loan amount does not exceed the home’s value and that the borrower or their estate aren’t held responsible for paying the balance if the loan was valued higher than the home value. An occurrence that can be seen if the worth of a home drops or the homeowner lives for a long time. There are three types of reverse mortgages: Home Equity Conversion Mortgage (HECM), proprietary reverse mortgage, and single-purpose reverse mortgage. However, the most
THE POWER IS NOW MAGAZINE | DECEMBER 2021
