Home Equity Evolution: Funding Life's Biggest Needs

A toy home sits on top of scattered hundred-dollar bills.

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For many homeowners, the family home represents far more than a place to live. It's often the single largest store of wealth on their balance sheets.

Yet, when it comes to planning for retirement, long-term care needs or estate strategies, home equity remains one of the most underutilized assets.

There are several strategies available to homeowners looking to convert their equity into income or financial leverage:

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Home equity lines of credit (HELOCs). These revolving credit lines require repayment and are typically best for short-term or planned expenses. They require good credit and reliable income, but they add debt to the homeowner's balance sheet.

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Reverse mortgages. This well-known option allows homeowners to stay in their homes while receiving income. The downside is that interest accrues over time, often significantly reducing the remaining home equity.

Reverse mortgages also include such costs as insurance premiums and origination fees.

Cash-out refinancing. Homeowners refinance their mortgages to take out a lump sum of cash. This strategy can be viable in low-rate environments, but in today's high-interest landscape, it can dramatically increase monthly payments.

Shared equity models. These newer solutions offer homeowners the ability to sell a minority share of their future home value in exchange for cash today.

Typically, this method doesn't involve monthly payments or interest. Like a reverse mortgage, they're nonrecourse, meaning there is no personal liability.

The shift: From debt to shared value

Unlike traditional financing options, shared equity solutions aren't loans and don't require servicing debt obligations.

They're designed to be a strategic enhancement to an adviser's toolkit, helping reposition home equity from a passive asset into an active part of a client's overall financial strategy.

Using shared equity solutions is similar to using cash on hand.

Why it matters now

There is an estimated $35 trillion in home equity in the United States, according to the Federal Reserve Bank of St. Louis, with 41% of homeowners carrying no mortgage debt.

Meanwhile, the cost of retirement continues to rise, longevity risk is real, and funding long-term care is an increasing concern.

At the same time, interest rates and market volatility have made it more difficult for advisers and consumers to rely solely on traditional investment strategies.

Liquidity needs often collide with the desire to preserve and grow assets, supported by the fact that in 2024, according to LIMRA, more than $400 billion of new life insurance, annuity and long-term care insurance premiums were primarily funded with cash or through investment portfolio sales.

That reduces liquidity, creating tax consequences and limiting future investment growth opportunities.

Weighing the tradeoffs and tailoring the strategy to you

Each option presents distinct advantages and tradeoffs.

Borrowing strategies offer immediate access to cash, but the debt can add pressure in retirement.
Reverse mortgages reduce financial stress in the short term but diminish estate value and can be complex to unwind.
Shared equity solutions, such as CHEIFS (Cornerstone Home Equity Insurance/Investment Funding Solutions), where I am the co-founder and CEO, provide tax-free cash without adding monthly obligations, but the homeowner shares a portion of the future home value upon sale or refinance.

No one-size-fits-all solution exists.

The right path depends on your financial goals, income, health outlook and estate planning intentions.

If your priority is maintaining full ownership, a HELOC or refinance might make sense.
If your objective is to protect cash flow without monthly debt obligations, reverse mortgages or shared equity models could be a better fit.

The key is to align your solution with your broader financial strategy.

Applications for homeowners and advisers

The versatility of home equity optimization through shared home equity products spans a range of planning needs:

Long-term care (LTC) planning. Homeowners can use tax-free funds to purchase dedicated LTC policies or hybrid life/LTC products, ensuring protection against future health care costs.

Lifetime income. Funds can be used to purchase immediate or deferred-income annuities, helping bridge retirement income gaps without drawing down investment portfolios.

Legacy and estate planning. Liquidity from home equity can fund irrevocable life insurance trusts (ILITs), charitable-giving strategies or intergenerational wealth transfers.

In-home health care. Homeowners can secure funding to age in place, enhancing quality of life while retaining independence.

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In-force policy funding. Clients with valuable existing life, annuity and/or LTC policies can use shared equity solutions to maintain or enhance these assets without cashing out or surrendering valuable benefits.

Pros and cons of shared home equity to consider

Pros:

No monthly payments or debt service, with no fixed repayment term
No impact on credit scores or cash flow
Retention of homeownership rights and lifestyle
Tax-free liquidity
Flexible use of funds across planning needs and lifestyle enhancements
Adviser-driven distribution to align with holistic planning

Cons:

Future appreciation (and depreciation) of the home is shared with the company you're sharing equity with
It's not a suitable solution for homeowners planning to sell or relocate in the short term. As the home is partially owned by an investor, it might be more challenging for homeowners to leave their homes as a legacy for their heirs without proper planning

Looking ahead

Optimizing home equity is no longer just about borrowing or downsizing. It's about managing wealth more intelligently to support strategic, tax-efficient financial plans.

Shared equity solutions are modern financing innovations that offer pragmatic alternatives that empower both homeowners and financial advisers to achieve their goals while maintaining control, flexibility and long-term value.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Craig Corn is the Co-Founder of Cornerstone Financing and a seasoned expert in structured finance, managing residential mortgage platforms and developing home equity solutions. Throughout his career, Craig has held senior leadership roles at institutions including MetLife Bank, Lehman Brothers, SBC Warburg, Salomon Brothers and Merrill Lynch, where he helped pioneer home equity release products and index-linked savings products.