Older homeowners aged 50 and older have taken a tremendous hit from the recession in terms of foreclosures since 2007, finds an AARP study, and it will impact their ability to pay for long-term care and medical expenses.
The total number of foreclosures among this “older” population is 1.5 million over the past five years, with minorities having a higher rate of foreclosure than the population at large. And those in the 75-plus age group also saw a disproportionate rate of losing their homes.
“Perhaps most disturbing, homeowners age 75 and older showed the fastest rise in this kind of debt, which can crumple fixed-income retirement budgets,” AARP writes. “Likewise, they had a higher foreclosure rate (3.2 percent) than younger members of the 50-plus group.”
More than 50% of foreclosures within that 50+ age group took place for borrowers with incomes between $50,000 and $124,999, with 32% falling under the income bracket of less than $50,000.
The foreclosure rate on prime loans for older borrowers was 2.3% overall in 2011—roughly 23 times the 0.1% rate seen in 2007.
“It’s not clear whether the increasing debt is because of refinancing, taking out new mortgages or grappling with rises in adjustable rate loans. However, higher living costs and fixed incomes appeared to contribute significantly to older Americans’ plight,” AARP writes. “…In their older years, people often tap their home equity—the biggest asset that many have—to pay for long-term care, home maintenance, medical bills and other expenses. What happens when that money no longer exists?”
View the study.
Written by Elizabeth Ecker