How Much Could Reverse Mortgages Contribute to Retirement Incomes?

How Much Could Reverse Mortgages Contribute to Retirement Incomes?

Retirees who want to stay in their homes can tap into home equity through a reverse annuity mortgage that pays them a tax-free monthly payment. We show that conversion of home equity into a reliable income stream could provide a significant boost in retirement income, particularly for low-income homeowners with significant equity. The cost of initiating a RAM, however, and many older adults' concerns about borrowing against this asset have limited interest in RAMs. Recent turmoil in the mortgage market and declines in home prices raise additional uncertainties about the potential for using home equity to boost retirement incomes.

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