Despite record property values, older homeowners least likely to consider home equity

Research on HELOCs highlights knowledge gap, educational opportunities for homeowners and financial advisors

Despite record property values, older homeowners least likely to consider home equity

Finance of America Reverse LLC (FAR), a leading innovation in retirement solutions and a subsidiary of Finance of America Companies, has released its first-ever Home Equity Punch List survey.

The survey results include information on potential uses for homeowners' equity as well as the various aspects that affect how homeowners feel about home equity and home equity-related financial products.

Among the high-level findings, which FAR will monitor and examine regularly to give a picture of the home equity landscape in the U.S.:

  • 86% of respondents stated that since they purchased their home, its value had improved.
  • Most (85%) cited purchasing a home as their best financial decision.
  • 84% said they intended to remain in their current residence for as long as possible.
  • 28% of respondents, or around 1 in 4 people, said they planned to borrow money against their home in the future.
  • A little over one-third of respondents (37%) have previously obtained a home equity loan; the majority (55%) have done so with a HELOC.
  • Nearly two-thirds (60%) of the 37% of borrowers who took out a home equity loan utilized it for debt consolidation or home upgrades.
  • Most respondents said they would use the money to make home improvements (33%), increase retirement savings (30%), or pay off debt if they had access to 20 to 50% of the value of their property (26%).
  • Lack of interest or need (42%) and a desire to avoid taking on further debt are the main deterrents for individuals who are unlikely to obtain a home equity loan (16%).

Even though older homeowners in the Baby Boomer and Silent Generation populations are more likely to gain from using their home equity, they were the least likely to contemplate doing so because of perceived risk, lack of product knowledge, and perceived necessity.

  • People over 55 who expressed concern about being able to live well in retirement were far less likely to take out a home equity loan (82%).
  • Older generations (94% of the Silent Generation, 89% of Boomers, 61% of Gen X, and 39% of Gen Z/Millennials) were twice as unlikely to contemplate taking out a home equity loan as younger generations.
  • Compared to Gen X (74%) and Gen Z/Millennials (83%) who both viewed home equity as a role in their financial planning strategy, less than half of Boomers (47%) did.
  • 54% of Boomers and 65% of members of the Silent Generation who did not take out a home equity loan cited a lack of interest or a lack of perceived need as their reason for not doing so.

Although financial advisors are a dependable source of information about money and retirement planning, the survey results show that just a tiny portion of financial advisors address home equity with customers.

These interactions with financial advisors and their clients are probably complicated by low understanding of or misplaced expectations regarding home equity products, according to FAR, which suggested financial advisors lack the necessary licensing to market home equity products.