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Understanding Housing Wealth
Your Home Is More Than a Place to Live
For many homeowners, their home represents one of the largest financial resources they have built over a lifetime.
But when planning for retirement, home equity is often treated differently from savings, investments, Social Security, pensions, and other retirement resources.
It doesn't have to be.
Understanding your housing wealth can help you see the bigger picture and make more informed decisions about your home, your finances, and the retirement you want to create.
You don't have to make a decision about your home today. You simply need to understand what you have and what choices may be available to you.
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* This advertisement does not constitute tax advice. Please consult a tax advisor regarding your specific situation.
What Is Housing Wealth?
Housing wealth is the financial value you have built in your home over time.
At its simplest:
Current Home Value – Mortgage Debt = Home Equity
But housing wealth is about more than a number.
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It includes understanding:
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what your home may be worth today,
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how much you currently owe,
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how your mortgage works,
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what it costs to continue living in the home,
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how much equity you have accumulated,
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and how that equity could potentially fit into your retirement plans.
For some homeowners, the best decision may be to simply continue living in the home and allow their equity to remain untouched.
For others, their housing wealth may eventually become an important part of their retirement strategy.
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The important thing is knowing your options before you need them.
Why Housing Wealth Matters in Retirement
During your working years, your home and your retirement accounts often grow alongside one another.
When retirement begins, however, we tend to think about the two very differently.
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You may look at:
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Social Security
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pensions
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retirement accounts
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investments
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savings
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insurance
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other sources of retirement income
But your home may represent a significant portion of your overall financial picture as well. That doesn't necessarily mean you should use your home equity. It means it deserves to be included in the conversation.
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Understanding your housing wealth can help you and your financial professionals make decisions with a more complete picture of the resources available to you.
Understanding Your Home Equity
Home equity grows in several ways.
You may build equity as you:
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Pay down your mortgage.
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Each payment may reduce the amount you owe.
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Own your home over time.
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Depending upon market conditions, your home's value may increase
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Make improvements to your property. Some improvements may contribute to the home's overall value.
If you have owned your home for many years, you may have considerably more equity today than you realize.
But there is an important distinction:
Home equity is not the same as available cash.
Your equity is part of the value of your property. Accessing that value generally requires a financial or housing decision, such as selling the home, refinancing, obtaining another type of financing, or using a reverse mortgage if you qualify.
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How much equity may actually be available to you will depend on the option you choose and your individual circumstances.
Your Home and Your Retirement Income Plan
Retirement can change the way we think about money.
During your working years, your paycheck generally provides the income needed for everyday expenses. In retirement, income may come from several different places.
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That makes the question less about: “How much money do I have?” and more about: “How should all of my resources work together?”
​Your home can be part of that conversation.
For example, housing wealth may be considered alongside other retirement resources when planning for:
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monthly living expenses,
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unexpected expenses,
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healthcare needs,
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home improvements,
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eliminating or restructuring mortgage payments,
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maintaining cash reserves,
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helping preserve other retirement assets,
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or preparing for changes later in retirement.
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​The appropriate strategy will be different for every household. The goal isn't simply to access equity. The goal is to understand whether your housing wealth can help support the retirement plan you already have—or give you additional choices when life changes.
Ways Housing Wealth May Be Used
There is no single “right” way to use the wealth you have built in your home.
Depending on your goals, you may decide to:
Leave Your Equity Alone
If your current mortgage, income, savings, and home are working well for you, there may be no reason to make a change. Understanding your housing wealth can still be valuable because you know what resource may be available later.
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Sell the Home
Some homeowners eventually choose to sell and use their equity to purchase another home, relocate, downsize, rent, move closer to family, or transition into another type of housing.​​
Use Traditional Mortgage Financing
Depending on income, credit, equity, interest rates, and other qualification requirements, traditional mortgage financing may sometimes provide access to home equity.
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Consider a Reverse Mortgage
For eligible homeowners, a reverse mortgage may provide another way to convert a portion of home equity into usable funds while continuing to own and live in the home, provided the loan requirements continue to be met.
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A reverse mortgage is only one possible strategy—and it should be evaluated alongside your other choices. That is why understanding your housing wealth comes before choosing a mortgage product.​​
Housing Wealth Is About More Than Accessing Equity
One important part of retirement housing planning is understanding the true cost of owning your home.
That includes more than your mortgage payment. Understanding the ongoing costs of maintaining and living in your home can help you determine how comfortably it fits into your retirement plans.
Consider:
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Property taxes
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Homeowners insurance
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Homeowners association dues, if applicable
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Utilities
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Repairs
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Routine maintenance
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Major future improvements
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Accessibility modifications
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Landscaping and property upkeep
Your house may have substantial value and still require significant cash flow to maintain. That's why a good housing strategy looks at both sides of the equation: What is your home worth—and what does it take to comfortably remain there?
Your Housing Wealth Can Change Over Time
Your home, finances, and priorities can change throughout retirement.
Reviewing your housing wealth over time can help ensure your home continues to support your needs and long-term goal. The answer that makes sense today may not be the answer that makes sense five years from now.
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Your home value may change.
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Your mortgage balance may change.
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Interest rates may change.
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Your income may change.
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Your health may change.
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Your family situation may change.
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And your priorities may change.
That is why housing wealth planning should not be viewed as a one-time decision.
It can be something you revisit throughout retirement.
When Should You Review Your Housing Wealth?
You don't need to wait until you have a financial problem.
In fact, reviewing your options before you need to make a decision often gives you more time and more choices.
It may be helpful to review your housing wealth when:
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You are approaching retirement.
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You have recently retired.
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You have been retired for several years and your financial needs are changing.
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Your mortgage payment is affecting your monthly cash flow.
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You are considering major home improvements.
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You want to remain in your home long term.
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You are deciding whether to move or stay.
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Your spouse or partner has passed away.
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Your healthcare or caregiving needs are changing.
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You are helping a parent or family member plan.
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Your home has increased substantially in value.
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You simply haven't reviewed your mortgage and equity in several years.
You don't have to be experiencing a problem to have the conversation. Sometimes understanding what is available today simply helps you prepare for tomorrow.
Start With a Housing Wealth Review
Your goals. Your home. Your current mortgage. Your equity. And what you want retirement to look like.
I start by understanding your home, your current mortgage, and what you want your retirement to look like. From there, we can explore whether your housing wealth could play a role in supporting your goals.
A complimentary Housing Wealth Review can help you understand:
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your current mortgage,
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an estimate of your home's value,
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your approximate home equity,
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how your housing costs fit into your retirement,
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potential opportunities or concerns,
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and which options may be worth exploring further.
There is no obligation to use a mortgage product. In some cases, the best recommendation may be to leave everything exactly as it is. The purpose is to give you information so you can make decisions from a position of understanding rather than urgency.