It’s generally recognized that the actual number of reverse mortgages originated in any given year is small in comparison to the potential market. But just how big is the potential market for reverse mortgage products? One of the more well thought out estimates we have seen comes from a March 2005 study done by the Georgetown University Long Term Care Financing Project:

(T)here are 24 million older households—defined in this report as those headed by a single adult aged 62 or older or a March 2005, Home equity conversion mortgages and long-term care, couple both of whom are 62 or older. Of these, 74 percent have at least some net home equity. However, about one-fifth of the households with home equity—or 16 percent of all older households—are ineligible for an HECM, either because another owner is on the deed or because the
available loan is too small to finance closing and other costs. This leaves 14.2 million households, or 59 percent of older households, eligible for an HECM.

Not all of these households are likely to use an HECM if they should find themselves facing high long-term care costs. On the one hand, 1.6 million potential borrowers have very low incomes and few financial resources other than their home. These households are already Medicaid beneficiaries or might rapidly qualify for Medicaid if they required expensive care and therefore would have little reason to borrow. (Nor, as will be discussed below, would their use of an HECM necessarily save money for Medicaid.) At the other extreme are households whose financial resources are already sufficient to cover their likely long-term care needs. The 3.8 million households in the top quartile by financial assets, those with $275,000 or more, are treated here as unlikely candidates for an HECM.

This leaves a net “target” population of 8.8 million households who might use an HECM for long-term care. These 8.8 million target households would have qualified for a median loan of about $47,000 in 2000. More than three-quarters could have received $25,000 or more, and one-quarter could have received $75,000 or more. Some of these households have other resources that would let them cover their own long-term care, but for many an HECM loan could make a real difference in how long they could afford to receive care at home.

Reverse Mortgage Growth Sputters in September

HECM Expected Interest Rates and the CPI

Understanding Reverse Mortgage Fears

Cash flow and how it relates to using a reverse mortgage to pay off an existing home loan.

7. How important is the goal of leaving a bequest?