PRIME LIVING
Tap into your home’s equity!
Eliz abeth Morse Read
We all want to stay in our home, living independently, for as long as possible as we age. But at some point, our financial costs will outstrip our financial resources. Can we afford increasing expenses as time goes on, whether they be medical bills, rising taxes, or an emergency home repair, on a fixed income?
As many as one third of US households have very little – or nothing – saved for retirement. And the remaining two-thirds have saved an average of only $73,200, which will not go far, even when supplemented by Social Security checks and pension funds. It’s time to look into tapping into your home’s equity as a way to secure your financial future.
Aging in place Many people don’t realize it, but your home equity may represent 60-80% of your overall retirement assets. Home equity is the difference between the appraised value
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of your home minus what you owe on any mortgages. If you’re still living in the home where your children grew up, it might be time to downsize and sell your home, or else consider finding someone to live in with you and share the expenses. You could also consider any number of home equity financial products, such as a Home Equity Loan, a Home Equity Line of Credit (HELOC) or a Home Equity Conversion Mortgage (HECM), which is more commonly known as a “reverse mortgage.” There are pros and cons associated with each product, so you need to consider and compare
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those options carefully. Home Equity Loans and HELOCs taken out for cash-flow problems are risky – if your health declines (and your expenses go up), keeping up with monthly loan payments can become more than you can handle. If you’ve lived in your home for many years, it may well be worth much more than what you originally paid for it, or else you might have almost paid off the original mortgage. Borrowing against that equity would give you extra cash to keep up the maintenance of your home, help you pay for day-to-day expenses and emergencies, and put enough
money aside to cover property taxes and home insurance. It can be an emotional decision to sell your home or to borrow against the equity, but it must always be balanced with the reality that you may not be able to afford staying in the home if you run out of funds. Discuss it with your adult children – they may well prefer receiving a smaller inheritance if it means that you’d be able to live independently in your home as you get older. Review your financial situation It’s important that you consult with a trusted financial advisor and your heirs before you make any decisions about your home – and no decisions should ever be made when you’re facing a sudden financial crisis. There are always other resources you can tap into to get over a financial emergency – help from your family, cashing in
