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Retirement-Aged Homeowners Least Likely to Utilize Equity

[1]Finance of America Reverse LLC (FAR) announced the publication of its first-ever Home Equity Punch List. FAR commissioned The Harris Poll to survey 2,000 U.S. homeowners 18 and older who live in the U.S. to obtain an understanding of home equity and its potential uses, as well as if and how home equity can fit into homeowners’ long-term financial goals.

The survey’s inaugural findings reveal that older homeowners are nearly two times less likely than younger generations to consider utilizing home equity loans. This is despite being in a position to potentially benefit the most from these financing solutions with U.S. homeowners age 62 and older holding more than $10.6 trillion in housing wealth.

A combination of factors can explain why 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 underscore the need for a greater collective understanding of the merits of housing wealth leverage for certain older homeowners, including a deeper understanding within the financial advisor community. Strikingly, 90% of survey respondents with a financial advisor trust they would suggest a home equity loan if in their best interest. Yet only 29% of survey respondents with a financial advisor have ever spoken with them about a home equity loan. This statistic aligns with other industry data as well.

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 a senior lending expert to play a role in the retirement planning conversation.

For FAR President Kristen Sieffert, these findings illustrate a prime opportunity to lean further into FAR’s education-first approach to home equity and using a 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,” said Sieffert. “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. 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

The survey findings offer insights into the potential ways homeowners might use their home equity, as well as the different factors that influence how homeowners view home equity and home equity products. Below is a snapshot of high-level findings that will be tracked and analyzed on an ongoing basis to provide an overview of the home equity landscape in the U.S.

Homeowners Closest to Retirement Are Least Likely to Utilize Their Home Equity

While older homeowners in the Baby Boomer and Silent Generation demographics are more likely to benefit from tapping into their home equity, they are the least likely to consider actually utilizing it due to risk perceptions, lack of product awareness, and perceived need.

Preparing for Retirement is a Top Priority for Homeowners

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

Both Homeowners and Financial Advisors Could Benefit from Home Equity Education

Financial advisors represent a trusted resource about finances and retirement planning, but survey findings indicate only a small percentage of financial advisors incorporate home equity into their planning discussions with clients. Limited awareness or misaligned expectations about home equity products likely complicates these discussions with financial advisors and their clients.

This may be because financial advisors aren’t licensed to sell home equity products, so other professionals may be needed to provide informed recommendations about how to utilize home equity. Therefore, 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.

“Homeowners are sitting on more equity today than ever before," said Jason Rudman, Chief Customer Officer at Finance of America Companies "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.”

For a more in-depth look at the Home Equity Punch List, including charts and methodology, click here [2].