Reverse Mortgages - What influences homeowners' decisions?

March 18, 2008 - PRLog -- Reverse Mortgages have become more and more common within the last few years, but are they right for you?  What we once thought of as a niche product with limited reasons to take one out, we are now seeing a new trend towards Reverse Mortgages as a staple of retirement planning.  According to a recent study by the AARP, there are many reasons that influence senior homeowners when deciding whether or not to take out a reverse mortgage.  These reasons include: improving quality of life, having money available for emergencies or the unexpected,  paying off their current mortgage,  paying for everyday expenses,  paying off other debts, paying for home repairs or improvements, and paying for health care costs.  Reverse Mortgage are not only used by  those that cannot afford to pay for their home, but are now beginning to be seen as a way to make life more enjoyable.  In part one of this two part series, we will look at the reasons that homeowners choose to take out a Reverse Mortgage and in the second part we will look at the reasons that homeowners choose not to take out a Reverse Mortgage.

The AARP study began by dividing the respondents into two groups: those who primarily decided to take out a reverse mortgage to pay for things that they felt they “needed” and those who primarily decided to take out reverse mortgages to pay for “extras.”  This seems to make sense and is a good groundwork for further analysis: you either “need” to do it or you “want” to do it but don’t need to.  The breakdown of those falling into each category was varied by key social, economic, and borrower characteristics. Those with lower income, lower assets or home value and those with poorer health status were more likely to cite their basic needs as the primary reason to take out a Reverse Mortgage while those with more income and assets were looking to maintain or improve quality of life.

For the people who were looking into Reverse Mortgages to pay for “extras,”  the main reason they cited for taking out a Reverse Mortgage  was to “improve quality of life,” with 32% of those surveyed choosing this as their main reason.  Even 12% of those who were using the reverse mortgage to pay for necessities still chose “Improve quality of life” as their main reason for the loan.  Nineteen percent of both groups stated that paying off their existing mortgage was the main reason for looking into a reverse mortgage.  What is interesting about this is that even though these homeowners were using the loan for something they needed to do, like pay off their existing debt, they still ultimately decided to get a Reverse Mortgage because of a desire to improve their quality of life.

The people surveyed were also asked about all of their motivations for looking into a Reverse Mortgage, and were able to cite as many reasons as they felt applied.  For this question, the two highest motivating factors were “improve quality of life” and paying for “Emergencies/unexpected.”  “Improving quality of life” was counted as a reason for looking into a reverse mortgage by 86% of people looking for “extras,” and 73% of people looking for “necessities.”  Paying for “Emergencies/unexpected” was cited as a contributing reason for looking into a reverse mortgage by 79% of people looking for “extras,” and 81% of people seeking to pay for “necessities.”  Between 40-47% of all surveyed said that paying off their current mortgage, or paying for home repairs/improvements was a reason that they looked into getting a reverse mortgage.

When looking at the reasons homeowners decide to take out a Reverse Mortgage it is also important to understand the reasons that some homeowners decide against one.  We will discuss this issue in our next installment of this two part series that can be found at website on our Reverse Mortgage Media Center. http://www.reversemortgagecity.com/blog

Website: www.reversemortgagecity.com