According to a new study from WSFS Mortgage, a division of WSFS
Bank (Nasdaq: WSFS), most homeowners with knowledge of reverse
mortgages agree they can allow you to stay in your home longer
(79%) and provide needed cash flow (76%) in retirement. Sixty-two
percent of respondents with knowledge of reverse mortgages agreed
they can provide more financial freedom in retirement, while 61%
said they can help cover expenses like long-term care.
“Reverse mortgages have undergone significant changes the past
decade, but the biggest change is how many financial advisors are
now incorporating housing wealth into their retirement income
planning,” said Jeffrey M. Ruben, President of WSFS Mortgage. “A
reverse mortgage could be a good option for those seeking to
strengthen their cash flow in retirement.”
The nationwide study, which surveyed 750 homeowners aged 60
years or older, gauged respondents’ financial stability, knowledge
and attitudes toward reverse mortgages.
Educational Opportunities
Lack of knowledge around reverse mortgages may be driving
homeowners to overlook them as a viable option for their financial
situation. Among respondents, nearly one-third (31%) report not
being knowledgeable at all about reverse mortgages, 40% are
slightly knowledgeable and 22% moderately knowledgeable, while just
7% report being very knowledgeable.
In comparison to reverse mortgages, the majority of respondents
felt they had a better understanding of credit cards (65%), a
traditional mortgage (61%), personal loans (60%), and a line of
credit (51%), underscoring the educational opportunity that
exists.
“It is not surprising that most Americans do not have a great
understanding of a reverse mortgage as it is mostly a strategy that
is not available for younger Americans,” said Jamie P. Hopkins,
Senior Vice President, Director of Private Wealth Management, Bryn
Mawr Trust. “So, while we get hands-on experience with other
borrowing techniques like student loans, credit cards, and
traditional mortgages as we move through life, we don’t get the
same hands-on experience with reverse mortgages. As such, the need
for more education around the product and strategies are arguably
more important for Americans.”
However, one-third (34%) said they would probably (21%) or
definitely consider (13%) a reverse mortgage if it was relevant to
their financial situation. After learning more about use cases and
benefits of reverse mortgages during the survey, 16% of respondents
who indicated they were very knowledgeable about reverse mortgages,
26% who were moderately knowledgeable and 22% who were slightly
knowledgeable said they would be more likely to get a reverse
mortgage, compared to 17% who said they were not knowledgeable
about reverse mortgages.
Among the list of Ruben’s recommendations:
- Know the basics: With a reverse mortgage repayment is
due when the last of the borrowers no longer occupies the house as
their primary residence. At least one borrower must be 62 years old
or older and must occupy the house as their primary residence.
Funds from a reverse mortgage can be provided in lump sums, monthly
payments or set up as a line of credit for when you need it.
- Potential Uses: A reverse mortgage can enable homeowners
to leverage the equity they’ve built in their home to eliminate
existing monthly mortgage payments, provide cash flow without
needing to tap into other retirement savings, pay off debt, and
more.
- For Those Looking to Downsize: Homeowners could sell
their current home and use the proceeds from that sale coupled with
a reverse mortgage on their new home to make the purchase without
the need for monthly mortgage payments.
- Work Closely with Your Advisors: Your financial advisor
and lender can help answer any questions you have and dispel the
stigma of reverse mortgages being a ‘last resort.’ They will also
be able to evaluate if one is right for your situation and help
weigh the pros and cons.
Retirement and Financial Planning Factors
Reverse mortgages can play a significant role in retirement and
financial planning by providing homeowners with a supplemental
source of income. Three-in-ten (29%) indicated they would
definitely or probably consider a reverse mortgage as part of their
retirement plan.
“For many Americans, their house is their largest asset, but it
can also be your largest liability in the sense of cash outflow
each month. Your home comes with a lot of costs, like mortgage
payments, utilities, property taxes, and more, which can really
impact retirement planning,” said Hopkins. “Housing, wealth and
retirement is more about cash flow, and can you maintain that cash
flow and your property while living the life you want in
retirement.”
Most homeowners with knowledge of reverse mortgages agree they
can provide needed cash flow (76%) and more financial freedom (62%)
in retirement, help cover expenses like long-term care (61%), and
allow them to stay in their home longer (79%). Among those who
would consider taking out a reverse mortgage, the top reasons were
covering home improvements (32%), supplementing regular income
(32%), and help covering daily living expenses (30%).
“You can use your home very strategically in retirement,” added
Hopkins. “Cash flow from a reverse mortgage can be an alternative
source to a traditional investment portfolio. It can help cover
things like long-term care, provide retirement income, cash flow
management, and tax planning benefits. A reverse mortgage isn’t
earned income so it is not taxable, but you will need to stay
current on your property taxes and insurance. It is vital to work
closely with your financial advisor to determine if a reverse
mortgage is a fit for you.”
Survey Methodology
The study was conducted by research company Opinium. The sample
included 750 homeowners ages 60+ nationwide. The online survey was
conducted from February 16-21, 2024, with a margin of error of +/-
4%.
About Opinium, Inc.
Opinium is an award-winning strategic insight agency built on
the belief that in a world of uncertainty and complexity, success
depends on the ability to stay on pulse of what people think, feel
and do. Creative and inquisitive, we are passionate about
empowering our clients to make the decisions that matter. We work
with organizations to define and overcome strategic challenges –
helping them to get to grips with the world in which their brands
operate. We use the right approach and methodology to deliver
robust insights, strategic counsel and targeted recommendations
that generate change and positive outcomes.
About WSFS Financial Corporation
WSFS Financial Corporation is a multibillion-dollar financial
services company. Its primary subsidiary, WSFS Bank, is the oldest
and largest locally headquartered bank and trust company in the
Greater Philadelphia and Delaware region. As of December 31, 2023,
WSFS Financial Corporation had $20.6 billion in assets on its
balance sheet and $84.3 billion in assets under management and
administration. WSFS operates from 114 offices, 88 of which are
banking offices, located in Pennsylvania (57), Delaware (40), New
Jersey (14), Florida (1), Nevada (1) and Virginia (1) and provides
comprehensive financial services including commercial banking,
consumer banking, treasury management and trust and wealth
management. Other subsidiaries or divisions include Arrow Land
Transfer, Bryn Mawr Capital Management, LLC, Bryn Mawr Trust®, The
Bryn Mawr Trust Company of Delaware, Cash Connect®, NewLane
Finance®, Powdermill® Financial Solutions, WSFS Institutional
Services®, WSFS Mortgage®, and WSFS Wealth® Investments. Serving
the Greater Delaware Valley since 1832, WSFS Bank is one of the ten
oldest banks in the United States continuously operating under the
same name. For more information, please visit www.wsfsbank.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20240319221595/en/
Media: Kyle Babcock (215) 864-1795
kbabcock@wsfsbank.com
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