Reverse Mortgage Statistics (2023)
Home Equity Conversion Mortgages (HECMs), commonly known as reverse mortgages, are a unique financial arrangement designed primarily for homeowners aged 62 and older.
With traditional mortgages, homeowners make monthly payments to a lender and gradually pay off their loan. With a reverse mortgage, homeowners convert a portion of their home's equity into cash without selling the property or taking on monthly mortgage payments, allowing them to age in place.
In this article, we will explore several key aspects of reverse mortgages, including the following topics:
- How Many People Get Reverse Mortgages?
- What Are the Requirements for a Reverse Mortgage?
- Who Gets Reverse Mortgages?
- Average Reverse Mortgage Loan Amount
- Pros and Cons of Reverse Mortgages
Key Reverse Mortgage Stats
- 64,489 reverse mortgages were issued in the U.S. in 2022.
- The median income of borrowers who took out an HECM in 2018 was $26,000, under half the median U.S. household income.
- The median amount loaned from reverse mortgages in 2018 was $135,000.
- The median home value of those getting a reverse mortgage was $305,000 in 2018.
- The average person has lived in their home for over 18 years before getting a reverse mortgage.
How Many People Get Reverse Mortgages?
In the fiscal year 2022 (October 1st, 2021-September 30th, 2022) there were a total of 64,489 Home Equity Conversion Mortgages (HECMs) in the U.S.
Although there are several different types of reverse mortgages, HECMs are by far the most popular and account for nearly all reverse mortgages made today in the U.S.
Here’s a historical look at the number of reverse mortgages over time.
The first FHA-insured HECM loan was issued to a woman in Kansas in 1989. In FY 2009, the FHA gave nearly 115,000 HECM loan endorsements which is still the peak in terms of reverse mortgage popularity in the U.S.
What Are the Requirements for a Reverse Mortgage?
Home Equity Conversion Mortgages (HECMs), the most common form of reverse mortgage loan, are specialized home loans exclusively available to homeowners aged 62 and older.
In addition to age, here are the other requirements for a reverse mortgage:
- The home must be your primary residence where you live for most of the year.
- You must either own your home outright or have a low remaining mortgage balance.
- You must not have any outstanding federal debts, such as federal income taxes or federal student loans. However, you can use the reverse mortgage funds to settle such debts.
- To cover ongoing expenses like taxes, insurance, and maintenance, you must have sufficient personal funds or be willing to allocate a portion of the reverse mortgage proceeds at the loan closing.
- Your home must meet certain maintenance standards. If it falls short of these requirements, the lender will specify the necessary repairs to be completed before approving the reverse mortgage.
- You are required to undergo counseling from a HUD-approved reverse mortgage counseling agency. This session will cover your eligibility, the financial implications of the loan, and alternative options.
These requirements ensure that reverse mortgages are used responsibly and suitable for eligible homeowners.
Who Gets Reverse Mortgages?
The average reverse mortgage borrower is likely to be a woman or a couple, over the age of 65, of white ethnicity, and with an income level below the median.
Reverse Mortgages by Gender
Reverse mortgages are slightly more common with women, with 36% going to single female borrowers. 21% of borrowers were single males, 41% served multiple borrowers, and around 3% of the loans were undisclosed.
Reverse Mortgages by Age
The median age of a reverse mortgage borrower is 73 years old. In addition, the average borrower has been living in their home for 18 years. Here’s a breakdown of reverse mortgage borrowers by age.
Reverse Mortgages by Income
The median income of borrowers who took out an HECM in 2018 was $26,000, under half the median U.S. household income. Here’s a breakdown of reverse mortgage borrowers by income in 2018.
Reverse Mortgages by Race
Looking at the racial distribution of individuals obtaining these loans reveals certain disparities. A significant majority (72%) of reverse mortgages were extended to individuals who identify as White. Black individuals received 6.37% of these loans, while Hispanic individuals received 5.41%.
Reverse Mortgages by State
The four states with the most reverse mortgages, which together represent nearly half of all HECM loans, are:
- California (36%)
- Florida (6%)
- Texas (4%)
- New York (3%)
Average Reverse Mortgage Loan Amount
In 2018, the average amount people got from a HECM reverse mortgage was about $135,000. Variations in loan amounts depend upon the borrower’s age and the value of the home.
As people age, they are allowed to borrow against a larger proportion of their home’s total value. As of 2023, borrowers aged 62 could loan up to 38.2% of the value of their home. At age 70, this increases to 43.9%, and by age 85, it is up to 57%.
The average amount borrowed for people between the ages of 62 and 64 was $105,000. For people 75 or older, the average loan amount was $155,000.
The maximum home value limit in 2023 was $1,089,300. In essence, someone over the age of 85 with a maximum home value could in theory loan a maximum of $620,901. The median home value of those getting a reverse mortgage was $305,000 in 2018.
Borrowers have three options for extracting the equity of their home:
- Taking cash as a lump sum
- Receiving payments over time
- A line of credit
Opening a line of credit is by far the most popular, with about 90% of borrowers opting for this option.
Pros and Cons of Reverse Mortgages
Reverse mortgages can be a useful financial tool for some older homeowners, but they also come with certain advantages and disadvantages. It's essential to carefully consider these pros and cons before deciding whether a reverse mortgage is the right option for you:
Reverse Mortgages Pros
Supplemental Income: Reverse mortgages can provide seniors with a source of income, allowing them to tap into the equity in their homes without selling or moving.
No Monthly Mortgage Payments: Borrowers typically do not need to make monthly mortgage payments while they live in the home. The loan is repaid when they move out, sell the home, or pass away.
Stay in Your Home: You can continue to live in your home as long as you meet the loan requirements, even if the loan balance exceeds the home's value.
Flexible Payment Options: Borrowers can choose how they receive the funds, whether through a lump sum, monthly payments, or a line of credit, depending on their needs.
Tax-Free Funds: The money received from a reverse mortgage is usually not considered taxable income, and it typically doesn't affect Social Security or Medicare benefits.
Non-Recourse Loan: Reverse mortgages are "non-recourse" loans, meaning that the lender cannot seize other assets or pursue heirs for repayment beyond the value of the home.
Reverse Mortgages Cons
Loan Costs: Reverse mortgages often come with high upfront costs, including origination fees, closing costs, and mortgage insurance premiums, which can eat into the equity.
Reduced Home Equity: As you receive payments from a reverse mortgage, your home equity decreases over time. This can limit the inheritance you leave to your heirs.
Interest Accrual: Interest on the loan accumulates over time, potentially growing the loan balance significantly, especially if you stay in the home for many years.
Complexity: Reverse mortgages can be complex, with various options and terms to understand. It's essential to work with a qualified counselor to ensure you fully grasp the terms and implications.
Risk of Losing Your Home: If you do not meet the obligations of the loan, such as maintaining the property or paying property taxes and insurance, you could face foreclosure.
Impact on Government Benefits: Large reverse mortgage payouts can affect eligibility for certain means-tested government benefits like Medicaid.
Heirs' Inheritance: When the borrower(s) pass away or move out of the home, the loan must be repaid. Heirs may need to sell the home to repay the loan, potentially reducing the inheritance they receive.
Home Value Fluctuation: If the housing market declines, it could impact the amount of equity left in the home when the loan becomes due.
Before pursuing a reverse mortgage, it's crucial to consult with a qualified financial advisor or counselor who can help you assess whether it's the right financial decision for your specific circumstances.
Additionally, consider alternative options for supplementing your income or accessing your home equity, such as downsizing, home equity loans, or grants and assistance programs.
Conclusion
With 64,489 Home Equity Conversion Mortgages (HECMs) taken out in 2022, it's clear that many seniors tap into their home equity.
What's striking is that in 2018, those who opted for HECMs had a median income well below the national average, at just $26,000, while the median loan amount was $135,000. These numbers suggest that reverse mortgages are a valuable resource for retirees seeking to leverage their substantial home equity to bolster their financial security, especially in cases where traditional income falls short of their needs.
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