The Hidden Wealth of Home Equity

A significant portion of a person’s wealth is tied up in their home. However, those who need to tap into this wealth the most may struggle to do so.

Forced Savings

Paying a mortgage is a form of forced savings. As you make each payment, you’re building equity in your home. According to the Federal Reserve, this equity now totals $31.8 trillion for all households, more than three times what it was in 2012. This is a significant amount of wealth, but it’s not easily accessible.

The Problem

Many homeowners have a lot of equity in their homes but little retirement savings. This is because saving for retirement is not mandatory, unlike paying a mortgage. As a result, some homeowners find themselves with a lot of home equity but little financial security in their golden years.

Tapping into Home Equity

There are a few ways to tap into home equity, but they’re not always easy. The most obvious way is to sell your home, but this may not be an option for older homeowners who are attached to their property. They may have built their home over the years, or they may have strong ties to their community.

Reverse Mortgages

A reverse mortgage is another way to tap into home equity. With this product, eligible individuals 62 and older can extract equity in a variety of ways, such as through a lump sum. However, there are some risks involved, and lenders have rarely underwritten more than 100,000 federally insured reverse mortgages in any fiscal year.

New Options

New companies are emerging that offer alternative ways to tap into home equity. These companies allow homeowners to hand over a portion of their future gains in their home’s value in exchange for cash now. These companies include HomePace, Hometap, Point, Unison, and Unlock.

Conclusion

Home equity is a significant source of wealth for many Americans. However, it’s not always easily accessible. As the financialization of our lives continues to grow, it’s essential to have options for tapping into this wealth. Whether it’s through reverse mortgages or new companies that offer alternative ways to access home equity, it’s crucial to have options for those who need them most.

FAQs

Q: What is a reverse mortgage?
A: A reverse mortgage is a loan that allows eligible individuals 62 and older to extract equity from their home in a variety of ways, such as through a lump sum.

Q: What are the risks involved with reverse mortgages?
A: There are some risks involved with reverse mortgages, including the risk of owing more on the loan than the value of the home.

Q: What are some alternative ways to tap into home equity?
A: Some alternative ways to tap into home equity include companies that allow homeowners to hand over a portion of their future gains in their home’s value in exchange for cash now.

Q: Why are these companies emerging?
A: These companies are emerging because they see an opportunity to help homeowners tap into their wealth and improve their financial security.

Q: Are these companies a good option for everyone?
A: These companies may not be a good option for everyone. It’s essential to carefully consider the terms and conditions of any loan or investment before making a decision.

Q: What is the future of home equity?
A: The future of home equity is likely to be shaped by the growing financialization of our lives. As more people seek ways to tap into their wealth, it’s essential to have options that are safe and accessible.

Author: www.nytimes.com

Orginal Source link