The High-Class Problem That Comes With Home Equity

A lot of money is tied up in people’s homes. Those who need to tap it most, however, may have the hardest time doing so.

Paying a mortgage is a form of forced savings. If you want to stay in your home, you have no choice but to make each payment. That money — plus appreciation in the home’s value — now equals $31.8 trillion for all households, according to the Federal Reserve, more than three times what it was in 2012.

Saving for retirement, on the other hand, is not mandatory. As a result, some homeowners end up with a lot of home equity but low retirement savings.

Here’s the problem with that situation. A retirement account is relatively easy to tap, and you can do it quickly. Home equity? Not so much.

The most obvious way to get to this equity is to sell your residence. But for some older homeowners, that may be out of the question.

Your home may be just the way you like it, because you built it that way or spent decades fixing it up. If you’re attached to local doctors or a house of worship, it is difficult to cut ties and move away. Clearing out years of belongings is a total pain. And an appropriate and affordable new place — no steps, minimal maintenance — may simply not exist wherever you want to be.