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As home prices surge, older Americans have the opportunity to use their home equity for retirement. (iStock)
Older homeowners are much less likely than younger generations to pull equity out of their homes, according to a recent survey from Finance of America Reverse (FAR).
A large majority of the Silent Generation (94%) and Baby Boomers (89%) responded that they were unlikely to use home equity line of credit products. Many of them also noted a lack of knowledge around product benefits.
This survey data comes as homeowners ages 62 and older held a record $10.6 trillion in housing wealth in the fourth quarter of last year, according to a report from the National Reverse Mortgage Lenders Association (NRMLA).
"An overwhelming majority of older Americans are not considering home equity in their approach to retirement but many should," FAR President Kristen Sieffert said in a statement. "This is why it is crucial that we continue to illustrate how they can check off more items on their punch list, including securing their golden years, by incorporating this asset into their retirement strategy.
"For thousands of U.S. homeowners, a home equity product such as a reverse mortgage may be the key difference in a plan that successfully sees them thrive through volatile years," Sieffert said.
If you're interested in tapping your home equity, you could consider a cash-out refinance. Visit Credible to find your personalized interest rate without affecting your credit score.
HOME PRICE GAINS COOL IN MAY, BUT REMAIN HISTORICALLY HIGH
Home values have risen to record territory in recent months. Prices surged by 18.3% annually in June, marking the 125th consecutive month of annual increases, according to the latest CoreLogic Home Price Index (HPI).
More than three quarters (86%) of FAR’s survey respondents in FAR’s survey said their home’s value has increased since they bought it. And older homeowners can take advantage of this increase in equity to help fund their retirement or pay other bills, Seiffert said.
"Older homeowners have an incredible opportunity in today’s housing market to tap into a vital alternative source of funding," Seiffert said. "When you consider that many older Americans are living on a fixed income and are likely drawing on severely depreciated retirement accounts to pay bills, tapping into home equity may make sense given the historic home valuation levels."
If you are interested in taking cash out of your home, you could consider a cash-out refinance. Visit Credible to compare multiple mortgage lenders at once and choose the one with the best rate for you.
DESKTOP APPRAISALS USHER IN NEW ERA FOR MORTGAGES, SPEEDING UP & SIMPLIFYING THE PROCESS
Respondents in the FAR survey indicated a strong desire to save and plan for their future retirements, and potentially even retire early. However, many also reported feeling anxiety over whether they would be able to save enough money.
The top financial priorities for all respondents included wanting to save for the future (39%) and wanting to save for retirement (35%). Other financial priorities included wanting to increase their emergency savings (26%) and wanting to become debt free and/or pay off debt (25%).
When it came to retirement plans, 68% of respondents expressed a desire to retire and then age in place. Many respondents also said they would like to receive more financial advice on managing debt. And others said they would be interested in a home equity loan if they knew more about it.
"Given respondents’ desire to pay off and better manage their debt coupled with an interest in learning more about home equity, there could be an opportunity to boost awareness of home equity solutions and equip financial advisors with more information to support clients’ goals," FAR stated in its survey.
If you want to learn more about drawing equity out of your home, contact Credible to speak to a home loan expert and get all of your questions answered.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at mo*********@cr******.com and your question might be answered by Credible in our Money Expert column.
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