American homeowners aged 62 and older gained more than 3 percent in home equity over the first quarter of 2017, according to the Reverse Mortgage Market Index released by the National Reverse Mortgage Lenders Association and RiskSpan on Friday. The group now holds $6.3 trillion in equity—up from $6.1 trillion in the last quarter of 2016.
So what’s driving senior equity upward? According to S&P and Experian, it’s rising home values.
“The growth in housing wealth for retirement-aged homeowners was driven by an estimated 2.6 percent, or $199.3 billion, improvement in senior home values, and offset by a 0.6 percent increase of senior-held mortgage debt that equaled $9.2 billion,” the report stated.
The Index, which hit 227.07 for Q1 2017, is now at its highest point since its launch 17 years ago. According to Peter Bell, President and CEO of NRMLA, this rising equity is allowing older Americans to stay put longer—choosing to leverage their equity to update or renovate their homes instead of moving on to new properties.
“Older adults who want to stay in their own homes as they age, and we know a majority do, may find that the house that was perfect for raising a family lacks the features to support aging in place,” Bell said. “But, instead of moving out, various modifications, such as stairless entryways and wider bathroom doorframes, can be made to accommodate new mobility and accessibility needs.”
Typically, homeowners have a few options when leveraging their home equity. They can secure a home equity loan, apply from a home equity line of credit (HELOC), refinance their mortgage for a cash-out payment, sell their home and buy a less expensive one, or sell their home and rent using the proceeds. Older Americans—those 62 or older—are eligible for a special type of home equity loan called a reverse mortgage.
“The housing wealth our seniors have built up in their homes over the years, their home equity, can be used to update the family house into a space for living comfortably and independently for years to come,” Bell said.”
According to the NRMLA, more than 1 million households have secured an FHA-insured reverse mortgage.