ARLINGTON, Va. & BLOOMFIELD, N.J.--(BUSINESS WIRE)--Older homeowners have considerable financial worries, but most do not see tapping their home equity as a strategy for creating greater retirement security, according to the results of new research released today by the National Council on Aging (NCOA) through its subsidiary NCOA Services LLC.
Jay Greenberg, ScD, CEO of NCOA Services, and Michael Mooney, sales leader of the Financial Institutions Group at Reverse Mortgage Funding LLC (RMF), which funded the research through a grant to NCOA, will present an overview of the findings at the American Bankers Association Real Estate Lending Conference in Orlando, FL, this week.
Conducted over eight months, the research gauged the interest in and understanding of home equity products among older homeowners and financial advisors. It relied on feedback gathered through focus groups with 112 consumers aged 60-75 and two comprehensive surveys of 254 financial advisors and 1,002 older homeowners.
Home Equity: An Overlooked Opportunity
The research found that retirement concerns loom large for consumers as they age. Most cited rising medical expenses (91%) and outliving retirement savings (83%) as their principal concerns. Four out of five respondents also expressed a desire to stay in their homes for as long as possible.
However, when considering financial preparedness, consumers focused primarily on accumulated assets such as 401(k) accounts, pensions, annuities, and savings. Even though their homes can represent as much as 80% or more of their net worth, older people generally overlooked or were unwilling to consider home equity as a retirement asset.
The research also revealed that both consumers and financial advisors do not have a full understanding of two common home equity products—a Reverse Mortgage Line of Credit and a Home Equity Line of Credit.
“For most older people, the use of home equity in retirement is not a question of if, but when and how,” said Greenberg. “We need to do a better job of educating consumers about the products available and how best to use their homes as a strategic asset as they age.”
What’s in a Name? Plenty When It Comes to Home Equity Products
To gauge their receptivity to and understanding of a Reverse Mortgage Line of Credit and a Home Equity Line of Credit, consumers and financial advisors were presented with both home equity products and asked which best met their retirement needs.
Interestingly, when the product was described but not named, 58% of consumers and 43% of financial advisors preferred a Reverse Mortgage Line of Credit over a Home Equity Line of Credit. Conversely, when both products were named, 68% of consumers and 37% of financial advisors reversed course and preferred a Home Equity Line of Credit.
Once aware that the unnamed product they liked was a Reverse Mortgage Line of Credit, a majority of participants still preferred the product and acknowledged a lack of education and understanding about the option. To fill this information gap, participants said they were open to advice from a trusted source on using home equity to help fund retirement.
The research also revealed that among financial advisors, there is great disparity in the level of knowledge and comfort among this group about Reverse Mortgage Lines of Credit, indicating a need to educate these key influencers about the home equity product, as well.
Craig Corn, CEO of RMF, said, “The study demonstrates that greater education and guidance about home equity release solutions is needed to help consumers and financial advisors make the right choice for their individual and clients’ needs. As an organization with older Americans’ best interests at heart, we see firsthand how the Reverse Mortgage Line of Credit positively impacts the lives of people who fully understand the product and its features. Continuing to drive education about home equity release products is critical to helping ensure this growing demographic segment is able to retire comfortably and confidently.”
NCOA’s research suggests that further education among consumers and financial advisors about home equity solutions is warranted. The findings also corroborate a 2016 study conducted by The American College of Financial Services titled The Home Equity and Retirement Income Planning Survey. This research revealed that retirees are generally misinformed about the Reverse Mortgage Line of Credit and how the product can be used as part of their retirement income planning process.
For more information, including a fact sheet with more detailed results, please visit www.ncoa.org/HomeEquity.
The National Council on Aging (NCOA) is a respected national leader and trusted partner to help people aged 60+ meet the challenges of aging. Our mission is to improve the lives of millions of older adults, especially those who are struggling. Through innovative community programs and services, online help, and advocacy, NCOA is partnering with nonprofit organizations, government, and business to improve the health and economic security of 10 million older adults by 2020. Learn more at www.ncoa.org and @NCOAging.
About NCOA Services LLC
NCOA Services is a wholly owned subsidiary of the National Council on Aging (NCOA). Its mission is to improve the health and economic security of millions of older adults and help make NCOA an enduring organization. NCOA Services is a social enterprise that partners with both for-profit and nonprofit organizations to develop creative solutions to address the challenges of aging in America and bring them to scale nationwide. Learn more at www.ncoa.org/NCOAServices.
About Reverse Mortgage Funding LLC
Established in 2012, Reverse Mortgage Funding LLC (NMLS ID #1019941) is one of the fastest-growing lenders in the industry, one of the nation’s largest GNMA issuers of reverse mortgages, and a recognized thought leader in the reverse mortgage business. A wholly-owned subsidiary of Reverse Mortgage Investment Trust Inc. (RMIT), the company’s focus is on originating, acquiring, investing in, and managing reverse mortgage loans and securities backed by reverse mortgage loans. The company is headquartered in New Jersey, with corporate offices in New York and California and field offices throughout the U.S. Learn more by calling (844) 804-3863 or visiting www.reversefunding.com. Follow Reverse Mortgage Funding LLC on Facebook at www.facebook.com/reversemortgagefundingllc and on LinkedIn at www.linkedin.com/company/reverse-mortgage-funding-llc.