More ‘younger’ seniors turning to reverse mortgages

Cash-strapped seniors are reaching into their home’s equity to find extra cash, according to a new report by the MetLife Market Institute and the National Council on Aging.

Reverse mortgage applications have increased 15 percent since 1999 among Americans age 62 to 64, according to the report.

A recent study in the Journal of Financial Planning also revealed that more younger seniors are using reverse mortgages as a strategy to supplement portfolio income rather than using them as “a last resort.” The study showed the combination can result in a net value of three times the residual net worth of a retirement portfolio.

“The average age for taking out reverse mortgages has been around 71,” said Sandy Timmerman, director of the MetLife Market Institute. “But with job losses, higher debt and living costs, more and more of the ‘younger’ seniors are looking at reverse mortgages as a way to pay their bills and keep their homes. It shows the devastation some seniors have gone through since the financial downturn.”

Reverse mortgages allow home owners to borrow against the value of their homes. In 2010, more than 80,000 Americans over the age of 62 took out a reverse mortgage compared to 25,000 in 1995.

“It’s not surprising that more seniors are doing this at an earlier age,” Karl Byrd, vice president at Security Ballew Wealth Management, told CNBC.com. “We live in a time when people are not planning for their retirement or can even get out of debt. Some seniors can’t even buy groceries right now.”