More seniors are researching reverse mortgages to stave off investment losses as home values decline, according to a report by Golden Gateway Financial.
The Oakland, Calif.-based brokerage analyzed data collected by its online reverse mortgage calculator along with S&P/Case-Shiller Home Prices Indices data released in February. Golden Gateway released its findings yesterday.
“Retirees who are unable to tap their investments or even return to work are turning to their home as their last line of defense, only to find its value is greatly diminished,” Golden Gateway founder and CEO Eric Bachman said in a company statement. “This economy is effectively rewriting the financial rules of retirement.”
The study found that fewer than half of all individuals researching a reverse mortgage on Golden Gateway’s website during the fourth quarter held a forward mortgage on their property.
“This means that in addition to those interested in paying off a forward mortgage or avoiding foreclosure issues, a growing class of borrowers are considering a reverse mortgage to help offset investment losses or to buy time for their portfolios to recover,” the company statement said.
But seniors are receiving fewer proceeds from a reverse mortgage as home values fall. Home price changes from the beginning of 2008 to the end of the year showed a steep drop off in value, the company stated. Markets such as Phoenix, Las Vegas and San Francisco were down more than 30%.
A borrower in those markets age 78 or 79, with a home initially valued at $200,000 in the first quarter 2008, would have received roughly $43,000 to $48,000 less cash in the fourth quarter, according to the report.
