Home equity is, as Steve Azoury, ChFC® and owner of Azoury Financial in Troy, Michigan, puts it, “the paid off portion of your home,” or the portion of your home that you own. Since it’s something you own, it’s something you can use.
Many borrow against their home’s equity as “it normally costs less to use with the house being the collateral for the loan,” Azoury says.
But retirees have things to consider before they tap into their home’s equity. With a fixed income and an estate to think about, is it wise for a retiree to borrow against their home equity?
Should retirees use their home equity?
In some cases, it does make sense for retirees to use their home equity. Expenses pop up in retirement, and it’s nice to have somewhere to turn when you need a financial pick-me-up.
Your home’s equity might be the right place to turn. Home equity loans and HELOCs come with significantly lower interest rates than credit cards and personal loans.
“If the house being paid off is not the goal of the retiree, then there should be no issue with one using the equity.” Home equity is “easy to use and can be put back, if not needed,” Azoury says.