Re-examining Home Equity

Most of us have held lifelong core beliefs about home ownership. These values were founded in the experiences of several generations over the last 70 or so years. I would suggest that we hold these beliefs so deeply, we are often directed by them without even being aware of it.

Because of our parents’ or grandparents’ experiences during the depression, we were raised to pay off mortgages as soon as possible and to believe that having no mortgage was better than having any mortgage.

In the 1950’s as more and more GI’s and other Americans bought homes, prices went up. In the ’60’s and ’70’s their children, the Baby Boomers, bought more homes driving the valuing of real estate higher. For 50 years, it seemed as though prices could only go one way.

That brings us to our current situation. With the bursting of the real estate bubble, we all learned that houses don’t always go up in value and we can’t always sell our homes or even get a mortgage.

Yet most of us continue to operate under the old paradigms. Instead of putting more away in a college fund or retirement account, we are switching from a 30 to a 15 year mortgage so we can pay it off faster. Instead of life insurance as a legacy strategy, we hope to pass the home along to the kids. Most financial professionals don’t even track home equity as an asset as they work to manage risk and wealth.

For those who are retired, options may include downsizing, selling or getting a reverse mortgage. For those preparing for retirement, continuing with a strategy which may not be in tune with the present and foreseeable future could have devastating results.

So, what is my point? We all may want to take a long hard look at what is happening in the real estate market. Then we might want to examine our views on home equity to be sure we are managing all our wealth with clear assumptions.

None of us know when or how this economy will change. That is why open discussions with our financial advisors, family and trusted supporters are so important. As we re-examine our investments, retirement funds and other financial strategies, should we be taking a long, hard look at our home equity, too?

Perhaps a home isn’t so much an investment as a place to live. After all, where we Age in Place is the biggest part of Aging in Place and it doesn’t happen by accident.

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About the author

Scott Funk has specialized in Home Equity Conversion Mortgage reverse mortgages for over a decade. He is a recognized Aging in Place advocate in his home state of Vermont. His monthly newspaper column Aging in Place has run for 7 years in 24 papers around the state. Scott is brings a lighthearted approach to his talks on Boomers, retirement and aging on purpose.