Home Equity Options for Age-Ready Living

As promised in my last blog, this week I’m going to give an overview of the fourth booklet in the “Housing Decision Guides” series from the Consumer Financial Protection Bureau (CFPB). “Using home equity to meet financial needs” discusses four ways to capture and use the accumulated equity in a home. Most importantly, it gives an unbiased description of the risks associated with each approach. Even if you think you know the differences, this easy to read booket is a great way to be certain. 

For many Americans, the equity in their home is a critical, and often the only source of “savings” they have been able to accumulate. Homeownership becomes the linchpin for wealth-building, so the ability to purchase and maintain a home that promises to appreciate in value, is about more than housing. That accumulating equity may become the source of funds for living expenses, home repairs, adaptations for age-ready living, and caregiving as longevity plans are crafted. Using that equity should be done cautiously.

The booklet gives a good explanation of four ways to convert home equity, plus includes a handy chart of the main points of each one.

  • Cash-Out Refinance
  • Home Equity Loan
  • Home Equity Line of Credit (HELOC)
  • Reverse Mortgage

The explanation of the various programs includes both the benefits and risks of each one.

Ask Yourself

The fourth booklet in this series goes into depth examining important questions to ask when considering home equity options:

  • How much is your home worth, and how much debt do you own on it?
  • How long do you plan on living in your home?
  • How much can you afford to pay each month?
  • How will your long-term financial plans be impacted by using your home’s equity?
  • What implications might your decision have on your heirs after you die?

As with the rest of the CFPB series, there is a helpful resources section at the end of the booklet.

When looking into using your home’s equity, the CFPB advises not borrowing more than you need, and looking out for scams, in both home equity and home improvement sales pitches. If it sounds too good to be true, if someone wants a large up-front fee, or a salesperson or “contractor” knocks on your door, beware.  CFPB reminds us to shop around, ask a lot of questions and don’t give out personal information without verifying the legitimacy of the financial institution you’re talking with. We can’t be too careful!

Take the time to download the CFPB booklets. Quick, informative reads worth saving when that awkward or difficult moment arises about “what’s next?”

Here are links to all four booklets in the Housing Decision Guides series:

Third Chapter Living celebrates, challenges, informs and promotes conversations about housing issues affecting the Baby Boomer Generation. Check out our website to learn more about our work on aging-in-place options. The author, Reese Fayde, is a dedicated problem solver and skills development coach. She’s passionate about working with change-makers — individuals committed to transforming the status quo, whether it’s in their industry, community, or organization.

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