How Social Security uncertainty may affect older homeowners and reverse mortgage demand

Article Summary

Claiming Social Security before full retirement age, which is 67 for people born in 1960 or later, permanently lowers monthly benefits. In one recent set of examples highlighted by the Times, one claimant gave up roughly $5,000 a year by filing at 64, while another lost about $300 a month by filing more than a year early.

Those reductions can build over time and may affect housing affordability, especially for owners or renters whose biggest fixed cost is a mortgage or rent payment.

For housing industry professionals, including reverse mortgage specialists, lower retirement income can raise the risk of mortgage stress or default among older homeowners. It may also increase interest in downsizing, shared housing, or moving to more affordable areas as retirees try to stretch tighter budgets.

It can also drive more interest in traditional reverse mortgages and other home equity release products that can help fill income gaps. Borrowers in their late 50s and early 60s may be especially well suited for these products because Social Security claiming decisions are approaching and older adults are denied credit at higher rates than the general population.

Trend has reversed, but it remains worth watching

Between October 2025 and April 2026, new claims declined by 235,000, or 10%, largely offsetting the previous year’s increase. Still, the reporting shows that headlines about Social Security’s financial health can influence when people choose to claim.

A Boston College experiment cited by the Times found that more alarming headlines led people to say they would file about a year earlier than those exposed to neutral wording, even when the underlying facts did not change.

Without congressional action, the retirement trust fund is expected to run dry by late 2032, which would trigger an automatic benefit cut of up to 22% under current law. That uncertainty has left many people nearing or already in retirement feeling anxious and dissatisfied, according to a source quoted by the Times. It can also affect when people retire, where they live, and how much home they can afford.

Several policy proposals are circulating, including bipartisan plans to raise or remove the current $184,500 wage cap subject to payroll tax, a change that could add about $3 trillion to the system over 10 years. For now, reverse mortgage lenders and other housing stakeholders will want to keep watching how Social Security claiming decisions interact with mortgage terms, home equity, and long-term retirement planning.

In this week’s Monday Morning Q&A, Larissa Morrell of Longbridge Financial told RMD that the typical borrower has changed over her more than 20 years in the business.

“Historically, a reverse mortgage was really something for people of the older retiree demographic — late 70s, 80s, 90s. Now we do not have that same demographic. Now we’re looking at people of a younger generation. They’re still working. They might be using a reverse mortgage to pay off credit card debt or cover increasing expenses,” Morrell said.

Federally insured Home Equity Conversion Mortgages and proprietary reverse mortgages can provide extra cash flow or eliminate monthly mortgage payments, potentially allowing a borrower to delay Social Security claims.

The Social Security Administration says people who start benefits at full retirement age receive 100% of their monthly benefit. That amount rises for each month benefits are delayed and can reach as much as 124% if a person waits until age 70 to file.

The Consumer Financial Protection Bureau has also previously said that the costs of a reverse mortgage generally outweigh the extra benefit a senior would receive from waiting longer to claim Social Security.