How to Benefit from Equity in Retirement

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Editor’s Note: This story originally appeared on

If you own a home, your net worth has likely gone up in the last year.

The skyrocketing home prices caused by the real estate frenzy fueling the pandemic has led to a scenario where U.S. homeowners sit on a record $22.7 trillion in equity after earning $2.7 trillion in equity over the past year, according to a new report.

If you’re nearing retirement and looking to cash in on your home ownership, there are many strategies you might want to consider, from downsizing to taking out a reverse mortgage.

But the question remains: How do you turn all that home ownership into retirement money? Here are several strategies to take advantage of your home equity.

Home values ​​rise

Homes in Chandler, Arizona
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Home prices in the United States rose last year at a rate not seen in four decades, according to research published by Unison, a home equity joint venture. Citing the S&P CoreLogic Case Shiller home price index, Unison indicated that home values ​​were 18.6% higher in June than they were a year earlier.

As prices skyrocket, so too has home equity, which is measured by the value of the home minus the mortgage debt. By July, 49 of the 50 largest metropolitan areas reported at least a 10% increase in average home ownership over the previous year, according to the report. Meanwhile, all but four states saw home values ​​rise at least 10% over the previous year.

Real estate equity is highest in the San Jose-Sunnyvale-Santa Clara, California metro area, with a median home value of $1.33 million. Homeowners in the greater San Jose area have a staggering $950,271 in equity, according to Unison research.

But nowhere has seen a big jump in average real estate equity like the Phoenix-Mesa-Chandler metro area in Arizona. There, homeowners have gained 28.7% or $42,112 in equity over the past year, as the median home value has increased to $336,895.

“Driven by strong housing demand and tight supply, aided by government support and near rock bottom mortgage interest rates, home prices have not been affected during the COVID-19 pandemic,” report author Winfield Shaw wrote. “As a result, there haven’t been many observed declines in stock values ​​in housing in large urban areas.”

Downsizing to a smaller home or rental

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The most obvious option is to sell your home, buy a smaller home and pocket the difference. Some downsizing retirees are giving up buying a new home entirely and choosing to rent instead.

These retirees are less likely to be interested in building equity in a home over several decades, and instead view their home as an expense rather than an investment.

cash refinancing

big money man
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For retirees who do not wish to relocate, cash refinancing may be a viable option. A cash refinancing is a new loan that replaces your existing mortgage.

While other types of refinancing can result in a lower interest rate or change the term of your mortgage, cash refinancing leaves you with a new mortgage for more than what you currently owe. Then you collect the difference in cash.

While cash refinancing will produce a lump sum of cash that is tax-free, there are risks and drawbacks associated with this type of transaction. In addition to paying closing costs, you are also giving up the equity that you supposedly worked on building.

And if the value of the house drops, you could end up owing more than the value of the house. Then again, if you’re committed to staying in your home and your retirement income can cover your monthly mortgage payments, cashing out may be an option for you.

reverse mortgage

reverse mortgage
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If you are at least 62 years old, you may qualify for a reverse mortgage. Like cash refinancing, a reverse mortgage allows a homeowner to tap into the equity in their home to cover expenses or meet income needs in retirement.

Unlike cash refinancing, though, you can receive cash in monthly installments, a line of credit, or a single payment.

The reverse mortgage loan is only required to be repaid in the event of your death or if your home is no longer your primary residence.

If you die after taking out a reverse mortgage, your heirs will either need to sell the property or use other money to pay off the loan and maintain home ownership.

Turn your home into rent

Retirees in front of their new home
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Retirees with the energy and desire to be owners can combine some of the strategies above to create a new income stream.

If you own your entire home, you can take out a mortgage on the home and use the infusion of cash for retirement expenses, including buying a smaller home or renting an apartment.

By turning your primary residence into a cash-flow rental property, you’ll hold on to the house and use your monthly rent to cover your mortgage payments. Put the rest in the pocket.

Assuming the property is still rented, it would be a valuable asset to leave to your heirs as part of your estate.


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The housing market’s massive gains in the past year have left homeowners sitting on $22.7 trillion in equity, according to a report from Unison.

If you are nearing retirement or have already retired, taking advantage of the equity in your home can be an effective way to supplement your retirement income. Downsizing, cash refinancing, and reverse mortgages are all ways to turn home ownership into cash for retirement.

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