San Diego Reverse Mortgages: Supported by Expensive Homes and Growing Senior Community

by Grant W. Martin on January 12, 2012

Reverse mortgages in San Diego have been getting more and more popular. Two main reasons for this include real estate with values much higher than the national median values, and a growing number of senior citizens, as shown by the census of 2010.

According to the most recent census, those age 65 and over are 13.4% of the population of the United States. This is a record and will only increase, in the biggest demographic change in history. By the year 2030 it is likely that seniors will number 72 million and will represent about 20% of the citizens. Just in the last 10 years the number of seniors grew 15.1% across the country and 23.5% in the western region. California is already the state with the biggest senior population, with 4.2 million.

San Diego is a particular example of these population changes. San Diego’s median age is getting higher and will continue to do so as the baby boomers join the senior population. The number of seniors is growing faster than other segments of the population. It is estimated that from 2000 to 2030 the number of those age 60 and over in the San Diego area will grow by 130%, but the region’s population in general will only grow by 38%.

Since the reverse mortgage is only offered to senior citizens, it’s no surprise that considering the growth of the senior population, this mortgage product has also been growing in volume. President Reagan signed the legislation authorizing this mortgage in February 1988 and it gives seniors cash for the equity in their home with no payments required. In place of regular payments, the interest accrues on their principal balance. The name of the product helps describe it. Whereas a conventional mortgage requires monthly payments and the balance gets lower over time, the reverse mortgage is the reverse of that.

This program had a pretty slow start, as it took the lending industry a while to understand it and for the public in general to become aware of it. There were 6637 loans created in 2000, with a dollar volume of $827M. This grew to 114,641 loans in 2009, with a dollar volume of $30.2 billion. Understandable by demographics, California and Florida have been vying with each other for the most reverse mortgages originated each year, with California having a wide lead in the overall number of reverse mortgages originated.

But an aging population is not the only factor in determining if a Home Equity Conversion Mortgage (the program’s more technical name), or HECM, will take hold in a given region. Home value is critical. Especially because the borrower can only get a portion of the value, depending on the age of the youngest borrower, the program becomes more attractive as the value of the home increases and the size of the loan proceeds thus grows.

However, the home values can’t be too high either. The highest value FHA will recognize for purposes of the loan is $625,500. San Diego’s median home value is about $300,000, something of a Goldilocks median value (just right), and certainly more generally attractive for loan purposes than the median value of homes across US, which is about $125,000. This makes San Diego a prime candidate for reverse mortgages, being part of the West’s aging demographic and having the kind of property values where this kind of loan can make a big impact on a borrower’s finances. In fact, San Diego’s reverse mortgage volume of September 2011 was a year over year increase of more than 11% from September 2010.

For more thorough information about reverse mortgages, information that is accurate and impartial, you should check out the Reverse Mortgage Educator. This is also the place to get personal help with a San Diego reverse mortgage.

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