HOUSINGNEWS REPORT
REVERSE MORTGAGES: CAN FINANCING FOR SENIORS CHANGE WITH THE TIMES?
to write-off itemized deductions as a result of tax reform, there’s no tax reduction off-set for most borrowers. For senior borrowers facing a mountain of mortgage and HELOC debt, a reverse mortgage might resolve the problem of huge monthly costs for principal and interest. The Age Factor In addition to tax changes and HELOC worries, there’s another factor which is likely to boost HECM interest: The senior population is soaring. According to the Population Reference Bureau, “the number of Americans ages 65 and older is projected to more than double from 46 million today to over 98 million by 2060, and the 65-and-older age group’s share of the total population will rise to nearly 24 percent from 15 percent.” The addition of more than 50 million seniors suggests that demand for such things as medical care, residential
“The senior issue with HELOCs concerns the repayment period. HELOCs may be perfectly affordable while in the workforce but with retirement and less income such payments can become problematic. For senior borrowers facing a mountain of mortgage and HELOC debt, a reverse mortgage might resolve the problem of huge monthly costs for principal and interest. ”
HECM interest, the same is also true with home equity lines of credit (HELOCs). It used to be that interest for as much as $100,000 in qualified HELOC interest was deductible. Now, says the IRS, HELOC interest is only deductible if the financing has been used to “buy, build or substantially improve the taxpayer’s home that secures the loan.” More than 361,000 HELOCs were originated in Q2 2018, a nearly 10- year high, according to ATTOM Data Solutions.
With a HELOC there’s first a “draw” period, say five or 10 years, when borrowers can take out money against their credit line and also put money back. Once the draw period ends there is then a repayment period, perhaps five to 20 years, when the money borrowed must be repaid with regular monthly payments. The senior issue with HELOCs concerns the repayment period. If a borrower has a $50,000 balance and 15 years to repay at 6 percent, the monthly payment will be $421.93. HELOCs may be perfectly affordable while in the workforce but with retirement and less income such payments can become problematic. As well, given the widespread inability
A HELOC is essentially a mammoth credit card secured by real estate.
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DEC 2018 | ATTOM DATA SOLUTIONS
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