Seniors are sitting on trillions of dollars in equity, according to the National Reverse Mortgage Lenders Association (NRMLA). The association reported that retirement-aged homeowners saw an increase of 2.8 percent in home equity, or $170.7 billion, in Q4 2016. This puts their total housing wealth at $6.2 trillion.
Home values for homeowners aged 62 and older in Q4 2016 grew by 2.4 percent, according to the NRMLA/RiskSpan Reverse Mortgage Market Index. The index reports an all time high of 221.75, and a year-over-year increase of 9 percent.
“The strong RMMI in the fourth quarter of last year shows that home equity continues to be a valuable asset for homeowners 62 and older,” said NRMLA President and CEO Peter Bell. “It’s time for consumers to study what it means to have home equity and to learn about its strategic uses, including how it can be used to support retirement goals.”
Despite the increase in equity and value, seniors are unwilling to tap into it. Fannie Mae’s National Housing Survey found that 37 percent of senior homeowners feel concerned for their finances in retirement, and only 6 percent of seniors are interested into tapping into their home equity to address these concerns.
The low rate of equity access through mortgage products among seniors may be due to a desire to stay out of debt, or the increased number of seniors who stay in the workforce into old age. Additionally, poor financial literacy and complexity as well as the high costs of some mortgage products may steer seniors away from such products. These factors combined have led to a large, untapped amount of wealth.
Research from the National Council on Aging (NCOA) and the Center for Retirement Research (CRR) at Boston College both show that seniors are not willing to consider their housing wealth as a financial resource in retirement. Seniors require extra knowledge of home equity tools, such as reverse mortgages.