Home equity tapped out? Here are income options for seniors
Possibilities include downsizing your home, selling assets, working longer and taking out a reverse mortgage. Each has its challenges and risks.
The safety net is almost gone, the nest egg is cracking.
Many Americans have recently found themselves changing their retirement plans after losing a substantial amount of home equity as the housing market and the overall U.S. economy struggle. These folks face years of living on fixed incomes from sources such as pensions, 401(k)s, individual retirement accounts and Social Security but don’t have the time to recover their losses.
Homeowners who tapped their home equity find themselves with no more funds to extract. Some have been laid off, relinquished their home in a foreclosure or lost pensions after their employers’ business failed. Ideas of a comfortable retirement full of relaxation and travel have been abandoned.
The good news is that about 30% of homeowners have no mortgage at all. So even though their properties are probably worth less now than a few years ago, these people can tap into that equity cushion if necessary.
The bad news, however, is that about 1 in 6 with a mortgage now owe the bank more than their homes are worth, according to Moody’s Economy.com. Most of these are property owners who purchased their homes within the last few years or refinanced their properties and siphoned off too much equity.
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