- Personal Finance
Aging Population and Reverse Mortgages
With more Senior Citizens, Are reverse mortgages really the way to go?
Current research shows that the world population age has been increasing over the last few decades and is expected to continue on this track for at least another 2 - 4 decades. By aging population, we mean people that are 50 years and over, and who will therefore be retiring from the work force within another 15 years or so.
This increase in the number of persons nearing or living way past retirement age is a testament to the medical advances being made and efforts being made by people to live somewhat healthier lives.
This of course is not the concern. What really is the concern however, is the fact that the growth rate of most countries has been steadily shrinking over the last few decades. This means that at some point, the proportion of our workforce to retired persons will drastically shrink as people continue to have less and less children or even continue to have them later in life.
With this lack of offspring support, we can understand why people would go for areverse mortgage. After all, they are no longer working, may have lost some or all of their retirement funds in the recent financial bust, and lets face it, the cost of living isn't falling in any hurry. The other unfortunate fact is that most people would have invariably lost some of the equity that would have accumulated over the years due to the crash of the real estate market.
ANYHOW, back to my original question, are reverse mortgages really the way to go?
I am no expert and I am just throwing my thoughts out there...
A reverse mortgage is a facility where the homeowner (over 62) gets a government funded loan from a financial institution for the value of the equity in their home. These funds of course allow the holder to live more comfortably or provides financing for what other reason may arise.
The major benefits to the people taking out the loan is that they now have financial freedom, and don't have to make any monthly payments as the loan is repaid upon their death or when they vacate the property. This of course means that the loan is usually repaid by surviving relatives or through the sale of the property.
Therefore, will less people having children to support and provide for them in their senior years, a reverse mortgage really maybe their best option as it can give them the freedom to remain in their own home and even allow them to source in-home care where required. In the end, this would reduce dependence on government funded care and place less pressure on the government overall as more seniors would be better able to support themselves and remain in the comfort of their home until their death.
Upon death, the loan would be repaid through the sale of the property.