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3 Ways Home Equity Can Fund Your Retirement

4 min read
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picture of author, Hometap TeamBy Hometap Team on September 5, 2019

First, let’s start with the bad news. Today, the average 65-year-old has 47% more debt than 65-year-olds did in 2003, according to the Federal Reserve Bank of New York.

Now, the good news. Despite the bleak numbers, when you consider the equity you’ve accrued in your home, Bank of America says you may be far better prepared for retirement than you previously thought. In fact, your home might be one of your most valuable assets.

That’s why it’s critical you weigh all your options when deciding how your home will play into your post-work finances. Need some ideas? Here are three ways your home can help fund your retirement.

1. Downsize and Convert Your Equity Into Cash

Selling your home is perhaps the most obvious way to use the equity you’ve built to fund your retirement. By downsizing and moving into a smaller—and cheaper—place, you get instant access to your current home’s equity in cold hard cash. You can also start building equity again in your new home.

If you aren’t looking to downsize, you could also consider selling your home and moving abroad or finding a community where you can get the same size house at a much smaller price.

2. Rent Out Your Space

Homes carry a lot of memories. If you’re not ready to sell yours or want to accrue a bit more equity in it before you do, consider renting it out. There are several ways to do this. You could find a long-term tenant or post your home on sites like Airbnb to rent it out to travelers. Don’t want to leave your home? Consider renting out a spare bedroom. Or tap into your home equity to transform the basement or garage into a five-star guest suite.

3. Unlock Your Home’s Equity

Renovating the basement isn’t the only reason to tap into your home’s equity. You could also use those funds to diversify your portfolio, pay off debt, or get help with your bills during retirement. When it comes to accessing your home’s equity, you have options.

Reverse Mortgages

If you’re 62 years or older, Bankrate says you may qualify for a reverse mortgage. This gives you fast cash in exchange for a share of the equity in your home.

Wondering if a reverse mortgage is a smart retirement strategy? Learn when to sign on and when to steer clear.

With a reverse mortgage, you have the option to deed your home to the lender after you pass. This way, your beneficiaries won’t be on the hook for the remainder of the loan. They also won’t have to go through the time-consuming foreclosure process because the home will already belong to the lender.

Before you decide to cash in on your home’s equity through a reverse mortgage, it’s important to weigh all the pros and cons.

Home Equity Investments

HELOC, Home Equity Loans, Cash-Out Refinance—What’s the Difference and Are Any Right for You? See the Breakdown in Our Latest Guide.

If you don’t want to deal with the hassle of a renter and aren’t ready to sell your home, it’s worth considering a home equity investment. A home equity investment allows you to tap into your home’s equity without taking on additional debt or monthly payments. Before the end of the term, you can settle by refinancing or buying out the investment with savings.

If you’re curious how much money you could receive from a home equity investment partner like Hometap, get an Investment Estimate from us today.

See if you prequalify for a Hometap investment in less than 30 seconds.

You should know

We do our best to make sure that the information in this post is as accurate as possible as of the date it is published, but things change quickly sometimes. Hometap does not endorse or monitor any linked websites. Individual situations differ, so consult your own finance, tax or legal professional to determine what makes sense for you.

Hometap is made up of a collaborative team of underwriters, investment managers, financial analysts, and—most importantly—homeowners—in the home financing field that understand the challenges that come with owning a home.

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