• by Jack Loechner , Staff Writer @mp_research, June 30, 2009

The Study on the Changing Role of Home Equity and Reverse Mortgages, by the MetLife Mature Market Institute, finds that growing numbers of older homeowners are starting to tap their housing wealth, using home-equity loans or reverse mortgages. However, they are often unsure about how to include this asset as an integral part of their financial strategy, rather than as a last resort.

Mortgage Status Among Homeowner Households Age 62 and Older
Status	% of Homeowner HH
Regular mortgage	21.5%
Regular mortgage plus home equity loan	4.8
Home equity loan only	8.5
Reverse mortgage	0.7
No home loan	64.5
Source: American Housing Survey, 2007

Sandra Timmermann, Ed.D, director of the MetLife Mature Market Institute, said "... Retirees need a new framework for thinking about how home equity can help assure their financial security and enable them to age in place without fear of running out of money."

The study finds that 35% of older Americans see their homes not just as places to live, but also as collateral for a loan. 14% are taking cash out of their house through a home equity loan or reverse mortgage. Older homeowners are using home equity to increase income security, enhance financial resilience to deal with unexpected expenses, and to improve debt management, among other things

This is a growing reality for affluent households who seek to enhance their lifestyle, as well as middle-income families for whom it may be their only choice.

Attributes of Homeowner Households Age 62 and Older, by Wealth Status
	Affluent	Middle Income			Poor
	House-rich and cash-rich	House-rich or cash-rich	Moderate wealth	House-rich and cash-poor	House-poor and cash-poor
Median Household Values
Age of householder	69	70	73	76	76
Home value	$409,000	$175,000	$125,000	$350,000	$65,000
Household income	$81,900	$49,800	$25,324	$12,468	$12,000
Other Household Demographics
Married	75.9%	64.9%	48.0%	27.3%	22.7%
Has a college education	55.2%	34.1%	15.6%	20.7%	8.3%
Householder worked last week	32.6%	24.8%	12.5%	5.7%	5.5%
No mortgage	48.1%	59.7%	71.6%	70.8%	79.3%
Total
Homeowner households age 62+	4,353,625	6,449,825	6,562,602	1,037,121	3,348,454
% of total households (21.75 million)	20.0%	29.7%	30.2%	4.8%	15.4%
Source: National Council on Aging (NCOA) calculations based on data from the American Housing Survey, 2007.

The study highlights different options for using home equity that are not part of the current national conversation. These include:

• The use of reverse mortgages to delay the age at which one might begin to collect Social Security, thus increasing the amount of one's ultimate monthly Social Security income
• Reverse mortgages as a stopgap measure to consolidate credit card debt, to cover investment losses or to defer mortgage payments
• Periodic distributions that would tap home equity to help people meet expenses if they outlive their savings/retirement income
• Programs that combine public benefits with modest amounts drawn from home equity to help seniors stay at home
• Home equity lines of credit for emergency spending, such as home maintenance, without which many homes decay and lose value
• Reverse mortgages with a line of credit option for borrowers to pay out-of-pocket health and home care expenses.

"With the right guidance and policy protection, reverse mortgages can be an important financial option for Boomers who do not have adequate savings." said Timmermann. The report emphasizes that consumer education must be part of any new efforts aimed at increasing the use of reverse mortgages.

The full study, Tapping Home Equity in Retirement: The MetLife Study on the Changing Role of Home Equity and Reverse Mortgages, and The Essentials: Reverse Mortgages, are available here  under "What's New."