Reverse Mortgages Can Provide Needed Cash Flow and Flexibility, But Educational Opportunities Still Exist, WSFS Mortgage Study Reveals

Rhea-AI Summary

A study by WSFS Mortgage reveals that most homeowners with knowledge of reverse mortgages see them as a way to stay in their homes longer and provide cash flow in retirement. The study also shows that many believe reverse mortgages offer financial freedom and can help cover expenses like long-term care.

Insights

Financial Analyst

The insights from the WSFS Mortgage study highlight a shift in the perception of reverse mortgages, which could influence the financial planning industry. Reverse mortgages, traditionally seen with skepticism, are now being recognized for their potential to enhance retirement cash flow. This change in sentiment, if it translates into increased usage, could affect the business of financial institutions offering these products. Financial advisors incorporating housing wealth into retirement planning could lead to a more holistic approach to asset management, potentially increasing the demand for reverse mortgages.

From an investor's perspective, increased acceptance and use of reverse mortgages could signal a growth opportunity for financial institutions like WSFS Bank. However, investors should also be aware of the risks associated with reverse mortgages, such as the potential for default and the impact of changing interest rates on the profitability of these products. It is essential to monitor how this acceptance translates into actual product usage and the subsequent financial performance of institutions offering them.

Market Research Analyst

The study suggests a significant portion of the target demographic lacks knowledge about reverse mortgages. This gap represents both a challenge and an opportunity for financial services firms. On one hand, educational initiatives could be necessary to inform potential customers about the benefits and risks of reverse mortgages, thus expanding the market. On the other hand, the lack of knowledge could be a barrier to adoption, potentially limiting market growth.

For businesses operating in this space, understanding the drivers behind consumer attitudes is crucial. Effective marketing strategies that address misconceptions and highlight the benefits in a transparent manner could be key to increasing product penetration. As market research analysts, observing the correlation between educational efforts and market growth will be important in evaluating the long-term potential of reverse mortgages as a financial product.

Elder Law Attorney

As an elder law attorney, the legal implications and protections for seniors considering reverse mortgages are of paramount importance. The study indicates a growing openness to using home equity as part of retirement planning, which could lead to more seniors opting for reverse mortgages. However, it is essential to ensure that these financial instruments are structured in a way that protects the homeowner's interests.

Legal professionals in the elder law field should monitor developments in legislation and regulation surrounding reverse mortgages to advocate for clarity and fairness. As the market potentially expands due to changing perceptions, safeguarding against predatory lending practices and ensuring clear communication of terms will be critical. This vigilance helps maintain the integrity of the market and protects the financial stability of the aging population.

WILMINGTON, Del.--(BUSINESS WIRE)-- 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240319221595/en/

Media: Kyle Babcock

(215) 864-1795

kbabcock@wsfsbank.com

Source: WSFS Mortgage

FAQ

What does the study by WSFS Mortgage reveal about reverse mortgages?

The study shows that most homeowners view reverse mortgages as a way to stay in their homes longer and provide cash flow in retirement.

How many homeowners believe reverse mortgages can provide financial freedom in retirement?

Sixty-two percent of homeowners with knowledge of reverse mortgages believe they offer financial freedom in retirement.

What percentage of respondents think reverse mortgages can help cover expenses like long-term care?

Sixty-one percent of respondents believe reverse mortgages can help cover expenses like long-term care.

Who is the President of WSFS Mortgage?

Jeffrey M. Ruben is the President of WSFS Mortgage.

How many homeowners were surveyed in the nationwide study?

750 homeowners aged 60 years or older were surveyed in the study.

What is the ticker symbol for WSFS Bank?

The ticker symbol for WSFS Bank is WSFS.