Costly Mistake for Seniors: Survey Finds Senior Homeowners Almost Twice as Likely Not to Use Home Equity Loans

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As average home values ​​in the United States soar this year, home equity loans are becoming an attractive way for homeowners to leverage their biggest asset. But while more than a quarter of homeowners are open to the idea of ​​home equity loans, new research has found nearly all older homeowners are against it.

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Older homeowners are nearly half as likely as younger generations to consider a home equity loan, according to a new survey from Finance of America Reverse (FAR), a retirement solutions company and part of Finance of America. Companies.

The survey of 2,000 US homeowners, conducted by The Harris Poll in June, found that 94% of Silent Generation respondents and 89% of Baby Boomers surveyed said they were unlikely to use home equity products.

This is the case even though older homeowners could potentially benefit the most from home equity loans because of the amount of money they have invested in their property. According to the FAR, American homeowners 62 and older hold more than $10.6 trillion in real estate wealth.

There are a few reasons older homeowners are less likely to apply for home equity loans, but two of the biggest are distrust of the merits of these loans and lack of knowledge about their benefits. Another problem is that homeowners rarely discuss home equity loans with their financial advisors.

The findings “underscore the need for a better collective understanding of the merits of real estate wealth leverage for some older homeowners, including a deeper understanding within the financial advisor community,” FAR said in a statement. Press release.

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 their home equity or are unsure of their ability to talk about it.

For older homeowners, however, home equity loans could prove an effective way to weather financial headwinds like rising inflation and expensive healthcare.

“Older homeowners have an incredible opportunity in today’s housing market to tap into a vital alternative source of finance,” FAR President Kristen Sieffert said in a statement. “When you consider that many older Americans live on fixed incomes and are likely tapping into heavily depreciated retirement accounts to pay their bills, tapping into their home equity may make sense given historical levels of home valuation.

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Other key findings from the survey include:

  • 86% of respondents said the value of their home had increased since they bought it.
  • More than 1 in 4 (28%) said they are likely to take out a home equity loan in the future.
  • Of the 37% of respondents who took out a home equity loan, 60% used their loan to improve their home or pay off debt.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who has previously held positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work has also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal, and Business North Carolina magazine. He holds a BA in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting has won awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A North Carolina native who also writes fiction, Vance’s short story “Saint Christopher” placed second in the 2019 Writer’s Digest short story competition. Two of her short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. Her first novel, Voodoo Hideaway, is published in 2021 by Atmosphere Press.

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