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Ten percent of older homeowners could benefit from HECMs

Older Homeowners Could Benefit from HECMsAbout 10% of the homeowners aged 65 and older would benefit from the use of home equity extraction tools, according to a new study from the Urban Institute — but major structural and institutional barriers remain.

Researchers Laurie Goodman, Karan Kaul, and Jun Zhu explored the untapped market for reverse mortgages and other home equity conversion products, analyzing the relationship between equity and liquid net worth. For a large swath of older Americans — specifically those with more than $100,000 in home equity but $50,000 or less in liquid net worth — converting that equity into cash represents a significant retirement strategy.

“This report shows that millions of U.S. households lack adequate income and savings, but possess a significant amount of home equity wealth,” the researchers wrote in the study, which was funded by Finance of America Reverse and used data from the Federal Reserve’s 2016 Survey of Consumer Finances. “For these households, liquefying a portion of their home equity by converting it into cash could allow them to pay back debt to eliminate or reduce monthly debt payment burden, or boost household income.”

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