Feeling house‑rich but cash‑poor? This episode of Next Act Ninjas packs a punch for homeowners 50 + who want to turn locked‑up equity into real retirement income. Host Rachael Van Pelt breaks down the $14 trillion in equity Americans aged 62 and up are sitting on—65 % of the typical retiree’s net worth—then walks you through every major play: strategic downsizing, cash‑out refis, reverse mortgages, ADUs, lease‑backs, and innovative equity‑sharing deals. Discover the true costs, hidden fees, and timing traps, plus mindset tips for balancing sentimental ties with long‑game financial security. If you’re ready to transform bricks into breathing room and fund the travel, wellness, or next investment you’ve been dreaming about, hit play now—then grab a free consult with Rachael to craft your best Next Act. Live well, love more, age less!
Feeling house‑rich but cash‑poor? This episode of Next Act Ninjas packs a punch for homeowners 50 + who want to turn locked‑up equity into real retirement income. Host Rachael Van Pelt breaks down the $14 trillion in equity Americans aged 62 and up are sitting on—65 % of the typical retiree’s net worth—then walks you through every major play: strategic downsizing, cash‑out refis, reverse mortgages, ADUs, lease‑backs, and innovative equity‑sharing deals. Discover the true costs, hidden fees, and timing traps, plus mindset tips for balancing sentimental ties with long‑game financial security. If you’re ready to transform bricks into breathing room and fund the travel, wellness, or next investment you’ve been dreaming about, hit play now—then grab a free consult with Rachael to craft your best Next Act. Live well, love more, age less!
Chapters
00:00 Understanding the House Rich, Cash Poor Dilemma
02:43 Exploring Home Equity Options
04:16 Downsizing: A Practical Approach
05:57 Cash-Out Refinancing: Pros and Cons
07:29 Reverse Mortgages: A Double-Edged Sword
09:05 Alternative Income Strategies from Home
11:40 Home Equity Sharing Agreements
13:07 Lease Back Arrangements: Staying Put
14:22 Long-Term Considerations for Home Equity Decisions
Hey, hey, welcome back to Next Act Ninjas, the go-to podcast for mastering your health and wealth longevity. I'm your host, Rachael Van Pelt, and today I'm going to dive into a topic that many of us over 50 struggle with, being house rich, but cash poor. The majority of Americans today have a substantial chunk of their net worth locked up in their home. In fact, the median homeowner over the age of 62 has a quarter of a million dollars tied up in their home equity. Collectively, the 62 and over crowd holds $14 trillion of all US home equity. That's 40 % of all equity. It's crazy.
But it's a familiar situation, isn't it? If you've owned your property for decades, watched its value rise, and steadily paid down your mortgage, then you've built up your wealth. The catch is that this "wealth" is only theoretical if you're not able to use it. And let's face it, most people need some of that to fund their retirement. So today I want to explore various ways that we can tap into that equity. We're going to look at all the potential advantages and pitfalls of each approach so you can decide which strategy works best for your Next Act.
But before we get started, I want to acknowledge that our homes carry emotional weight that goes far beyond mere dollars and cents. For many of us, home is where we raised our children, hosted gatherings, and created countless memories. So letting go of that home can feel like we're giving up a piece of our identity.
On the flip side, housing has become one of the most significant financial assets people own. It isn't just a roof over our heads. It's one of the keys to unlocking financial security in retirement. So we're looking for a balance between those emotional ties we have to our home and the very practical need to fund our next two to three decades.
Part of deciding what to do involves asking yourself, how attached are you to your current living situation? And does that attachment serve your long-term financial goals? You just might discover that the home you've been clinging to is actually a barrier to creating your best Next Act. A life that's filled with greater flexibility, fewer financial strains, and more opportunities. Opportunities to enjoy the lifestyle that you have worked so hard for.
For context, let's start by talking about the real estate climate. In most markets, home values have increased significantly over the past few decades, although we have seen some dips here and there. This means that you probably have a substantial amount of money just sitting in your property, money that's essentially "frozen" and waiting for you to utilize. In fact, most retirees in the US today have 65 % of their total net worth tied up in their home. So it only makes sense that we would want to free up some of that money for retirement.
However, as markets and interest rates fluctuate, it can be hard to know whether to tap into our home equity now or to wait. Timing depends heavily on local market trends, the cost of borrowing, your financial situation, and of course, your longevity. You have to think long game. Some people are going to urge you to sell or refinance immediately, claiming that the market will tumble next year, while others are going to insist you wait another five years, you might capture even more appreciation. Of course, no one has a crystal ball, so I encourage you to do your research. Talk to real estate and financial experts and take a hard look at your local market before you make a move. A lot of financial success hinges on timing, but timing is notoriously unpredictable. The best strategy is often one that aligns with your needs, comfort level, and life stage, rather than trying to time the market perfectly.
One of the most straightforward ways to free up equity is downsizing. In simple terms, this just means selling your larger home and buying or renting a smaller, less expensive one. If you've been living in a multi-bedroom house for, say, 20 or 30 years, you're probably going to be able to sell it at a hefty profit and then purchase a more modest home with a significantly lower price tag. The difference between the sale of your current home and the purchase of your new home can become cash to bolster your retirement account, fund travel, or support other lifestyle choices.
Downsizing doesn't just free up immediate capital. It also tends to reduce recurring expenses like property taxes, utility fees, and maintenance costs. This is appealing from a budgeting perspective, but before you decide that downsizing is the obvious choice, consider all of the implications. A smaller place might just mean less room for visiting family or storing your possessions. Are you really ready for that? Are you prepared to part with many decades worth of belongings? Are you comfortable moving to a different neighborhood or even a different city to find a market where downsizing is going to yield significant savings?
And will the new place truly be more affordable once you factor in potentially higher property taxes or homeowner association fees? These are all critical questions you're going to have to answer for yourself. The concept of downsizing seems like a no-brainer at the surface level, but the reality is it's way more complex and more emotional than people think.
Another conventional route is doing a cash-out refinance. That involves refinancing your existing mortgage for more than you currently owe, with the difference coming to you as a lump sum of cash. If you've built up a lot of equity over the years, this can be a fairly quick way to access a large amount of money. Unlike selling your home, you get to still live under the same roof, which is a huge plus if you have strong sentimental ties or you just don't want the hassle of moving.
But be sure to factor in interest rates, closing costs, and the long-term implications of increasing debt load at this stage of life. Cash-out refinancing was extremely popular when interest rates were at historic lows because you could often refinance to a lower rate and still take out cash. But in this higher interest rate environment, this option can lead to larger monthly mortgage payments than you're used to.
And you want to remember that refinancing extends the life of your mortgage. And that could have significant implications down the road. So make sure that the math truly works in your favor. That near-term bolus of cash can really hurt your long-term monthly income stream. And for that matter, a cash-out refinance may not even be an option for you. Banks do their own math. They're going to scrutinize income closely for retirees. And they're only going to approve a refi if the numbers work in their favor.
Another way to free up cash from your home is the Home Equity Conversion Mortgage that's backed by the FHA. This is commonly referred to as a reverse mortgage and it's only available to homeowners who are 62 or older. A reverse mortgage allows you to borrow against your home's equity without requiring monthly payments. Though you do remain responsible for paying property taxes, insurance and home upkeep. The loan only becomes due when you move out of the house or pass away. At that time, the home gets sold and any proceeds go towards paying off the loan's balance.
Advocates of reverse mortgages are going to point out that they free up your home's equity as a lump sum or even a monthly income stream, while allowing you to stay in your home. Critics highlight there are hefty loan origination fees, insurance premiums, and higher interest rates. Those higher interest rates mean that the loan balance is going to grow quickly over time and it'll shrink any remaining equity you have in your home. So when you pass away, there may be less to leave your heirs.
Before jumping on this option, I think it's important to consider your future. Do you intend to leave your home to family members or do you perhaps want to downsize in the next few years? If so, this may not be the best option. I think reverse mortgages are a wonderful tool, but they're not for everyone. The key is to thoroughly understand the terms and costs. In fact, a requirement of this type of loan is speaking with a HUD-approved counselor or a financial advisor to ensure that you're making a fully informed decision.
Now let's pivot to some alternative methods for leveraging your home to generate cash flow. You're not so much tapping into your equity as leveraging what you have to create some income. One possibility is renting out a part of your home, also known as "house hacking". Maybe you have a basement that can be converted into a private living space or an extra room that could be advertised on a short-term rental platform. This method allows you to retain ownership while generating monthly income. If you live in a desirable area, short-term rental guests can even pay high rates, and that's going to boost your income.
However, being a landlord or a host, even in your own home, comes with its own challenges. You do have to handle upkeep, scheduling, guest turnover, the inevitable quirk of living with strangers, and so forth. And of course, it requires a bit of a mindset shift to open up your private space to outsiders. If you're uncomfortable with this level of intrusion, it may not be a good fit.
Another option is finding a long-term roommate who can rent out a portion of your home. This arrangement provides a much more stable tenant and income, but it also commits you to sharing your space for an extended period of time. Deciding between these two rental options depends on your temperament, how your home is laid out, and what local laws and HOAs allow.
Another option, that's gained popularity in certain parts of the country is building an Accessory Dwelling Unit, or ADU. These are smaller independent living quarters on the same lot as your home. Depending on local regulations, you can convert a garage, an attic, a backyard structure into a rentable dwelling. ADUs are wonderful. They can significantly increase your property value while still generating income that you can put towards retirement. But construction can be very expensive and time consuming. You're going to want to check your local zoning rules and assess the potential return on investment.
Even if the idea of an ADU sounds appealing, you could face neighborhood opposition or strict building codes, so you have to do your research. It's one of those creative strategies that when executed properly can provide steady cash flow. However, when done hastily or in a market with low demands for such rentals, it can become an expensive and stressful project with minimal payoff. Consider whether you have the patience and the resources to navigate the bureaucracy of permits and the unpredictability of those construction costs.
A slightly more unusual concept for generating cash flow is a home equity sharing agreement. In this arrangement, a company or an individual invests in your property and you receive a lump sum in exchange for part of future appreciation. These deals vary widely in their structure.
My husband and I actually did this with my parents' home. They needed the liquidity and we wanted the investment. So we hired a lawyer to create the LLC and purchase agreement. Over time, we bought more and more shares of the property, so my parents got cash out over time, and we in turn increased our ownership of a property that was growing in value. It was a win-win situation. On the plus side, this can be a way to unlock equity without taking on the burden of debt. On the minus side, you're essentially trading away a portion of your future potential gains. So if your home's value skyrockets over the next decade, the investor reaps some of those profits.
You also have to be careful about contract terms that are too restrictive, especially if you might decide to move earlier or later than initially planned. Read the agreement carefully and always consult with an attorney before entering any shared equity agreement. While some companies in this space are reputable and transparent, others charge hidden fees or include clauses that work against your best interests.
Yet another approach, which is far from mainstream, is selling your home but remaining in it through a lease-back arrangement. In this scenario, you sell your property to a buyer, usually an investor, and then you lease it back from them. That allows you to continue living there while unlocking the equity you had in that property. It can be a great option if you're set on staying put and don't want the emotional upheaval of a move. And keep in mind the investor could be a family member. If one of your kids loves the home, wants it to stay in the family, and has the money to invest, this can be a great option.
A big caveat is that your former home is no longer truly yours. You're now a tenant, and your lease terms could change over time. Rent could become more expensive, or the new owner could decide to sell, forcing you to relocate unexpectedly. It's critical to scrutinize lease-back contracts to ensure that you have enough stability for your long-term plans. It's not a widely used strategy, but for certain people who value location over ownership, it's a great compromise. Just remember that psychologically it can feel strange to be a renter in what used to be your own home.
Before diving into any of these methods, be sure to look closely at the big picture. What's your long game? What are the pros and cons of each scenario? Real estate markets can and do undergo correction. We've seen booms and busts throughout history, so it'd be naive to think values only go up. If you don't plan ahead and find yourself in urgent need of cash, you could find yourself in a situation where you're forced to sell in a downturn. In which case, the equity that you were depending on for retirement is going to be less than you anticipated.
Likewise, any strategy that involves borrowing, be it cash out refinance, HELOC, reverse mortgage, those come with a price tag of interest and fees, and that can eat away at your equity. The tax implications are another important factor. While there are significant capital gains exclusions on the sale of a primary residence, any scenario involving rentals or partial sales is going to add to your tax complexity.
Another thing to consider, particularly if you're over 60, is your health and your mobility. Make sure that whatever strategy you choose aligns with your potential future needs for medical care and home accessibility. Don't just make decisions based on immediate returns. Remember, you're playing the long game. Think about how your choice is going to affect your lifestyle over the next 10, 20, maybe even 30 years.
Bottom line, tapping into your home equity can be a powerful way to fund your retirement, especially if you're feeling cashflow constraints. However, there's no one size fits all. Whether you're thinking about downsizing, refinancing, reverse mortgages, rental strategies, home equity sharing, leaseback arrangements, doesn't matter. They all have their own pros and cons. So before making any moves, be sure to assess your comfort level, your financial situation, and your long-term goals.
Do your research, talk to financial planners, consult with real estate professionals, and perhaps more importantly, reflect on what your ideal lifestyle looks like. The decision to tap into home equity is going to have emotional and psychological implications. You want to make sure that your approach aligns, not just with your bank account, but also with your sense of wellbeing and personal fulfillment.
If you find yourself feeling house rich but cash poor, I encourage you to hop on my calendar for a free consult. I'd love to help you think through what's best for your family, your legacy goals, your day-to-day quality of life, because my mission is to provide you with the tools and insights you need to live well longer. I want you to be able to create your best Next Act. Making the right choices about your home equity is a pivotal step in that journey.
Thank you for joining me for another episode of Next Act Ninjas. If you haven't already, be sure to subscribe and share today's episode with someone that might benefit. Until next time, live well, love more, age less, my friends.