Seniors Have Other Options When They Can’t Afford to Move

The long-held retirement dream usually went along something like this. Once the kids are out of the house, you start thinking about downsizing. The house is too big, but the equity cash you get from selling allows you to buy something smaller and live comfortably in retirement.

But that isn’t the case anymore. As Meredith Whitney, the “Oracle of Wall Street,” told Bloomberg TV, homeowners are instead borrowing against their homes. In fact, 44% of home equity loans are being taken out by seniors.

Says Whitney, “Which is counterintuitive. It’s crazy, right?”

It doesn’t make sense. Those seniors are going into more debt to accumulate more cash to pay for retirement and other needs, such as long-term health care. It’s like the old saying, they’re “borrowing from Peter to pay Paul.”

The result is, according to Whitney, that only one in 10 seniors can afford assisted-living facilities. They’re too busy paying off Paul.

How did we get here?

Look no further than the housing market. As of late May, the going rate for a 30-year fixed mortgage is 6.94%. That drives up the cost of real estate. The median existing-home sale price rose 1.8 percent from April 2024 to today’s price of $414,000, marking the 22nd straight month of year-over-year price increases, according to Bankrate.

Bankrate continues by saying, “April 2025 home sales slowed to an annual pace of just 4.0 million, the slowest number for the month since the dark days of April 2009.”

Basically, the home market is in a kind of lockdown. Seniors, who account for 42% of all homebuyers, are borrowing against their equity instead of selling their homes.

What is a senior supposed to do?

Faced with these economic challenges, retiring seniors are faced with a dilemma. How to pay for their retirement, which may include long-term health care, while leaving a legacy for their children?

It seems impossible.

But the main reason why seniors are borrowing against their home equity is that there’s so much of it. The average homeowner holds $313,000 of home equity, up 6% from last year.

That home equity translates into a senior’s largest asset. But there’s got to be a smarter way to tap into that equity without going into more debt, right?

There is. Homeowners are realizing that a home equity investment agreement, or “HEI,” can be the proper channel to access their home equity, debt-free. The strategy converts a portion of their home equity into funds, which they can use to pay for insurance, annuities, and other financial planning approaches.

With an HEI, Homeowners don’t borrow money – it’s not a loan. They instead sell a fractional interest of their future home equity to an investor in exchange for a lump sum payment. The investor does not receive payment of its fractional interest until the homeowner’s death, sale or move-out of the home, or upon a set term (e.g., 10-30 years). An HEI can allow homeowners to continue to enjoy the benefits of homeownership, without adding monthly payments or debt.

But not all HEIs are equal. Homeowners should shop around and look for lower fees and caps on the investor’s percentage interest, and a longer set term – or no set term.

An equity loan could throws homeowners, especially seniors, into a whirlpool of increased debt, more payments, and less certainty about their futures.

With an HEI, they could have the flexibility they’re ultimately searching for and always dreamt about. It becomes the new dream.

_{This article is for informational purposes only. The opinions expressed above are of the author only and are not endorsed by Bloomberg L.P. or Meredith Whitney. This is not financial or tax advice. Always consult a financial or tax professional for such advice.}