The RiskSpan Reverse Mortgage Market Indexwhich measures held equity by older homeowners on a quarterly basis reported an all-time high increase of 227.07 in the first quarter of 2017. Since the index’s establishment in 2000, the current Q1 report marks a new record in its charts.
According to this report from the National Reverse Mortgage Lenders Association (NRMLA), seniors aged 62 and above had seen their equity rise by 3.1 percent in Q1 2017. This figures to $6.3 billion worth of collective equity, which is up from the $6.13 billion amount of collective equity the quarter prior.
What does this mean?
Equity is often associated with ownership as it represents the portion of the value of the home that is not owed. Thus, an increased equity means these seniors now own more of their home than the previous quarter. What is the reason behind this?
The increase of home values is pointed out as the major reason why home equities of senior homeowners have increased in the past few months. It is estimated that there was an increase of $199.3 billion in home prices – a 2.6 percent march up from the previous quarter. This is only offset by the equivalent 0.6 percent increase in mortgage debts held by seniors which amounted to $9.2 billion in total.
The benefits of higher equity
There are many ways by which senior homeowners can benefit from the recent hike in home prices. Consider these forms of equity loan:
a.) Home Equity Loan. The rate is fixed and primarily used to take out a lump sum from a homeowner’s existing equity. If you want a secured loan with a non-fluctuating rate, not subject to the volatile pressures of the market, and you want to keep your current mortgage, a Home Equity Loan is the preferable option.
b.) Home Equity Line of Credit. This option has lower interest than Home Equity Loans, but the rate is adjustable. This type of equity loan allows you to borrow money via a line of credit, much like how you use a credit card. This is also helpful if you need the money fast.
c.) Cash-Out Refinance.This type of equity loan’s rates can either be fixed or adjustable. It’s even possible to have an interest only option. A cash-out refinanceallows you to tap a larger amount of money such as if you need $100,000 or more. A cash-out refi is also the wiser option if you want to take advantage of today’s historic low rates, or if you need the cash immediately.
Senior homeowners can take advantage of this current condition by either letting their equity sit and make homeownership faster, or access the equity and cash them out to use the money for home adaptability renovations.
Although a good portion of older homeowners prefer to stay in a care facility for ease when the need arises, many also prefer to age in place, refusing to abandon their ‘homes.’ This is viable and becomes easier, of course, if the home is properly structured to cater to the changing needs of an aged homeowner. The money can be a great help in making this arrangement possible.