Skip to main content

Older Homeowners Know Little About Home Equity Products

Katie Jensen
Jul 27, 2022
older homeowners

U.S. homeowners age 62 and older hold more than $10.6 trillion in housing wealth. 

KEY TAKEAWAYS
  • 94% of the Silent Generation and 89% of the Baby Boomer respondents said they were unlikely to use home equity products.
  • Nearly two-thirds of financial advisors (63%) either can’t talk about or are not sure about their ability to speak to home equity.
  • 64% of respondents were either misinformed or unsure that some home equity loans can be used to eliminate your monthly mortgage payment.
  • 76% of Silent Generation and 72% of Boomers expressed interest in retiring and aging in place.

Older homeowners are nearly two times less likely than younger generations to consider using home-equity loans, despite being in a position to benefit the most from these financing solutions — U.S. homeowners age 62 and older hold more than $10.6 trillion in housing wealth. 

That's one finding from the first-ever Home Equity Punch List report, produced by Finance of America Reverse LLC (FAR), a retirement solutions innovator and part of Finance of America Companies. 

The report's findings are based on The Harris Poll, commissioned by FAR, that surveys 2,000 U.S. homeowners 18 and older to determine their understanding of home equity and its potential uses, as well as whether and how home equity can fit into homeowners’ long-term financial goals. FAR said it intends to publish the survey annually and track homeowners’ perceptions and use of home equity over time. 

According to the report, 94% of the Silent Generation and 89% of Baby Boomer respondents said they were unlikely to use home-equity products — including a reticence to consider the merits of home equity, a noted lack of knowledge around product benefits, and misaligned expectations that financial advisors would recommend home-equity solutions if appropriate for their clients.

These findings prove there is a need for more collective understanding of the merits of housing wealth leverage for certain older homeowners, including a deeper understanding within the financial advisor trust they would suggest a home equity loan if in their best interest, FAR said. Yet, only 29% of survey respondents with a financial advisor have ever spoken to them about a home-equity loan. 

This aligns with other industry data. According to a recent study by the Academy of Home Equity in Financial Planning, nearly two-thirds of financial advisors (63%) either can’t talk about or are not sure about their ability to speak to home equity. In this gap, FAR sees an opportunity for both consumers and financial advisors to learn about the stabilizing impact of housing wealth for 55+ homeowners and for senior lending experts to play a role in the retirement planning conversation. 

FAR President Kristen Sieffert said these findings illustrate a prime opportunity to lean further into FAR’s education first approach to home equity and using reverse mortgage as part of a holistic retirement strategy. 

“Older homeowners have an incredible opportunity in today’s housing market to tap into a vital alternative source of funding,” Sieffert 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."

Seiffert added, "The survey results validate what FAR has long believed and evangelized through our partnership with the Financial Planning Association and our consumer marketing efforts — that an overwhelming majority of older Americans are not considering home equity in their approach to retirement but many should. 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.”

Home Equity Punch List 

  • 86% of respondents said their home’s value has increased since they bought it.
  • 85% of respondents said buying a home was the best investment they ever made.
  • 84% of respondents stated they want to live in their home for as long as they are able.
  • Roughly 1 in 4 respondents (28%) indicated they are likely to take out a home equity loan in the future.
  • Just over one-third of respondents (37%) have taken out a home equity loan before, with the majority (55%) using a HELOC.
  • Of the 37% who have taken out a home equity loan, nearly two-thirds (60%) used their loan for home improvements or paying off debt.
  • With access to 20-50% of their home’s value, most respondents would allocate the proceeds to: home improvements (33%), increasing retirement savings (30%) or paying off debt (26%).
  • Among those unlikely to take out a home equity loan, the leading reasons include a lack of interest/need (42%) and not wanting to take on more debt (16%).

Survey Findings

  • Those 55+ that indicated they were anxious about their ability to live comfortably in retirement are much more unlikely to take out a home equity loan (82%).
  • Older generations are two times less likely to consider taking out a home equity loan compared to younger generations (94% of Silent Generation; 89% of Boomers; 61% of Gen X; 39% of Gen Z/Millennials).
  • Less than half of Boomers (47%) considered home equity as a factor in their financial planning approach, compared to 74% of Gen X and 83% of Gen Z/Millennials.
  • Among those respondents who have not taken out a home equity loan, 54% of Boomers and 65% of the Silent Generation stated it was due to lack of interest or perceived need.

Boomers and the Silent Generation indicated they were the least familiar with HELOCs and HELMs compared to younger generations. Overall, knowledge about home equity loan features was low among all respondents. 

  • HELOC Familiarity: 63% of Gen Z/Millennials; 60% of Gen X; 58% of Boomers: 57% of Silent Gen
  • HECM Familiarity: 59% of Gen Z/Millennials; 46% of Gen X; 37% of Boomers; 37% of Silent Gen
  • 64% of respondents were either misinformed or unsure that some home equity loans can be used to eliminate your monthly mortgage payment.

Preparing For Retirement Is A Top Priority Among Homeowners

Across all ages, respondents expressed a strong desire to save and plan for future retirement and retire as early as possible. A majority experience anxiety over whether they will be able to achieve their desired lifestyle in their later years.

  • Top financial priorities for all respondents include: 39% want to save for the future; 35% want to save for retirement; 26% want to increase their emergency savings; 25% want to become debt free / pay off debt.
  • 68% of all respondents expressed a desire to retire and then age in place, yet more than half (53%) of respondents also expressed that they are anxious about their ability to live comfortably in retirement.

Older generations generally expressed a strong interest in retiring and aging in place and reducing costs.

  • 76% of Silent Generation and 72% of Boomers expressed interest in retiring and aging in place.
  • Reducing monthly cost of living is top priority for the Silent Generation (34%) and Boomers (27%), compared to one-in-five Gen X (20%), and roughly one-in-10 Gen Z/Millennials (13%).

Homeowners and Financial Advisors Could Benefit From Home Equity Education 

Financial advisors are not licensed to sell home equity loan products, so other professionals may need to provide informed recommendations about how to utilize home equity. Homeowners should also seek out their own information and resources to better understand how to manage their home equity and be sure to consult with a licensed loan officer if they are interested in pursuing home equity products. 

  • 9 in 10 respondents trust their financial advisor would discuss a home equity loan if it is in their client’s best interest.
  • Of those surveyed with a financial advisor, only 29% have ever spoken with their advisor about a home equity loan.

Respondents expressed a strong desire to pay off and better manage their debt coupled with an interest in learning more about home equity, which could be an opportunity to boost awareness of home equity solutions and equip financial advisors with more information to support clients’ goals. 

  • 67% of respondents stated that they want to receive advice on how to manage debts and liabilities from their financial advisor.
  • 43% would be interested in a home equity loan if they knew more about it.

“Homeowners are sitting on more equity today than ever before,” Jason Rudman, Chief Customer Officer at Finance of America Companies, said. “Whether through reverse or hybrid retirement mortgages, home improvement loans, or other innovative products, Finance of America is committed to delivering a diverse set of flexible, end-to-end home financing and home equity solutions that work best for our customers and their families. With such a broad offering, we are proud to be able to walk alongside our customers and provide strategic guidance about the ways to utilize their home equity at every step of their lifelong financial journey.”

Published
Jul 27, 2022
Home Prices Decline, Inventory Rebounds

If sales keep dropping and inventory keeps growing, we may reach a buyer's market by December.

Analysis and Data
Sep 23, 2022
Redfin: Bidding War Rates Drop Despite Fewer Buying

The 'New Weird': Mortgage rates surge and bidding wars drop as more people choose not to buy a home.

Analysis and Data
Sep 23, 2022
Home Flips Dip Nationwide, But Profits Surge

The typical resale price on flipped homes reached another all-time high of $328,000.

Analysis and Data
Sep 22, 2022
Mortgage Rates Hit 14-Year High

Report released Thursday shows the housing market continues to face headwinds.

Analysis and Data
Sep 22, 2022
Home Affordability Up For 3rd Straight Month In August

MBA, however, says the recent stretch of modest affordability improvement likely hit a speedbump this month, as mortgage rates rose above 6%.

Analysis and Data
Sep 22, 2022
The Fed Raises Interest Rate 0.75% For The 3rd Time

Chairman said housing market may have to go through "a correction" to return to balance.

Regulation and Compliance
Sep 21, 2022