Due to rising fuel and engery costs many baby boomers are struggling to keep up with living costs. Some of the early boomers are taking out reverse mortgage loans to make life more comfortable or improve their homes. Others decide that to better enjoy their retirement they would like to go on vacation or get a new car.
Most reverse mortgage loans have been taken out in California, where real estate prices have climbed significantly over the last decade. The reverse mortgage loan market is growing quickly nationwide though, and over 90% of reverse mortgage buyers are opting for Home Equity Conversion Mortgages.
Reverse mortgages have grown over 500% in the last 5 years. Why are they so popular?
"The wonderful part of a reverse mortgage is that it is a financial planning tool that effectively takes an illiquid asset and turns it into a liquid one, without tax consequences of selling stocks" or other investments, said Jim Mahoney, chief executive of Financial Freedom Senior Funding Corp.
The scope of use is greatly changing. Reuters also reports that some people have went so far as to use their reverse mortgage to buy airplanes.
Uses of home equity are adapting to new borrower profiles.
"When our typical borrower was a widowed female it was more of a needs-oriented loan," said Bell.
"We've seen it become more of a security-oriented loan," he added. "People don't necessary need the money to make ends meet day to day but want to set a stand-by reserve should they need it. Or people are getting by OK and they'd like to add an element of discretionary spending."
Tom Hardington, an 85-year-old retiree and WWII aircraft mechanic from Munhall, Pennsylvania, used part of his reverse mortgage to fulfill a dream: buying a 1966 Cessna 172 plane.
