Be honest. Do you understand reverse mortgages and how they work? If not, you’re not alone. According to the Home Equity and Retirement Income Planning Surveyreleased by The American College of Financial Services, seven out of ten seniors don’t understand reverse mortgages. According to the survey of more than 1,000 people between the ages of fifty-five and seventy-five, just thirty percent of the participants earned a passing grade on basic knowledge about reverse mortgages. Other key findings of the retirement survey include:
- Despite a strong desire to age in place, only fourteen percent of the respondents had considered a reverse mortgage, with only one respondent having entered into a reverse mortgage.
- The number one reason forty-four percent of people did not enter into a reverse mortgage was they did not need it because of sufficient income.
- The respondents were generally misinformed about reverse mortgages, while holding a slightly negative view on reverse mortgages as a retirement tool.
- Respondents thought they were more knowledgeable on reverse mortgages than their knowledge quiz answers suggested, showing both some degree of overconfidence and misunderstanding.
So what is a reverse mortgage? A reverse mortgage or home equity conversion mortgage (HECM) is a special type of home loan for homeowners sixty-two years or older that requires no monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner's insurance. Depending on your circumstances, a reverse mortgage might be a good option to make retiring in your Arizona home possible.
The HECM is a plan that can give older Americans greater financial security according to the U.S. Department of Housing and Urban Development (HUD). Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements and more. Every retirement plan is different, but the Home Equity and Retirement Income Planning Survey shows an overwhelming number of people nearing or in retirement want to remain in their current home as long as possible.
Want more information about reverse mortgages in retirement? Or are you looking to buy an Arizona retirement home of your own? Please contact Sharon Mason today!