Answering Your Kids' Tricky Questions, When facing a financial crisis, you could tap into your home equity - but it's often costly and complex. Reverse mortgages and their alternatives, Home equity represents about 70 percent of the total assets of middle-income retirees, not counting Social Security and pension benefits. Many people, even those who hope to leave their house to their children, often have no choice but to tap their home equity when facing financial or health crises.
One option for people in such situations is to take out a reverse mortgage, which lets them draw on their home equity while continuing to live at home. But the loans are costly and complex, and many consumer advocates say they should be viewed as a last resort. So you might want to evaluate all possible options before you face such a crisis.
"The decision to tap home equity needs to be made as part of an overall financial plan," says Barbara Stucki, vice president for home-equity initiatives at the National Council on Aging in Washington, D.C. "You have to be mindful of the fact that home equity is finite, and that if you really run into problems you can lose your house."
One option for people in such situations is to take out a reverse mortgage, which lets them draw on their home equity while continuing to live at home. But the loans are costly and complex, and many consumer advocates say they should be viewed as a last resort. So you might want to evaluate all possible options before you face such a crisis.
"The decision to tap home equity needs to be made as part of an overall financial plan," says Barbara Stucki, vice president for home-equity initiatives at the National Council on Aging in Washington, D.C. "You have to be mindful of the fact that home equity is finite, and that if you really run into problems you can lose your house."
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