By the numbers, Baby Boomer homeowners are financially better off than their younger neighbors. 75% of Americans between the ages of 55 and 64 own their own home. It’s even higher for those 65+. Nearly 70% of this generation have lived in their home for 10+ years. Often, they bought their houses 20-30 years ago for a fraction of what they’re worth now. And, on average, those houses regained or topped their pre-housing crisis value. So, it’s no surprise that many Boomer homeowners have built up a healthy amount of home equity. But how are they using it?
With the kids starting to leave the nest, you might expect Boomers to be downsizing. But that’s not the trend. 88% of Boomer homeowners say they plan to renovate in the next three years. 60% of older homeowners use home equity for upgrades. Homeowners aged 55 and older account for 50% of all home improvement spending nationwide. Part of this is because Boomer home projects tend to have a bigger scope than those of Millennial and Gen X homeowners.
Beyond improving the livability of their homes, Boomers are seeing other benefits of making home improvements. Upgraded kitchens, bathrooms, and energy-efficient windows often raise home values. Same with curb-appeal projects like landscaping or giving your house a fresh paint job. Adding square footage to your home can also add value. And, of course, boosting home value helps these homeowners recoup some of the home equity they invested. Plus, many home improvements are still tax-deductible. The new tax law allows for fewer home equity-related deductions, but interest can still be deducted when home equity is used to “buy, build, or substantially improve a taxpayer’s home that secures the loan.”
Boomers aren’t just tapping into their home equity to fund home improvements. Those kids that are leaving the nest are heading to college and Boomer parents are often using home equity to help fund their children’s educational expenses. With college tuition costs soaring, home equity can often be an affordable alternative to student loans, especially private student loans.
As surveys show for all age groups, Boomers are also using home equity to consolidate high-interest debt at a better interest rate. And, like many of their older neighbors, Boomers are using their HELOCs as a source of just-in-case emergency funds since home equity rates tend to be lower than credit card rates.
Custom Fit Home Equity
Home equity can be a smart and affordable way to finance some of life’s big expense. For Salal members, we’ve developed Custom Fit Home Equity. It’s a uniquely flexible home equity tool that combines the best parts of two traditional home equity products. Custom Fit gives you one variable-rate line of credit for quick access to cash when you need it. You also get up to five fixed-rate loan segments that let you lock in a low rate whenever you want. And you always have just one simple monthly payment.
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Custom Fit Home Equity
|LINE OF CREDIT - VARIABLE RATE||8.24%-10.49%**||No minimum draw amount. Revolving line of credit with 10-year draw period |
15-year amortization after end of draw period.
|FIXED-RATE LOAN SEGMENTS||5.50%-9.50%***||$5,000 minimum draw amount. 5, 10, and 15-yr terms available. Fully amortized principal and interest payments.|
*APR=Annual Percentage Rate. Actual APR will be based on creditworthiness.
**Index=Wall Street Journal Prime Rate. The APR is variable and may change during the term of the loan. The minimum APR is 3.24% and the maximum APR is 18.00%.
***10-Yr Nominal Constant Maturity Treasury. EXAMPLE PAYMENT—Fixed-Rate Segment: $384.27 a month based on a 60-month term, $20,000 loan at 5.75% APR.
All loans subject to approval. Loan amount and HELOC combined loan-to-value (HCLTV) subject to occupancy status; Max. loan amount from $150,000 to $250,000 and HCLTV can range from 65%–70%. Max. LTV based on approved credit and property valuation. Homeowner’s insurance required. Residential real estate only. Subject property must be in CA, OR, or WA state and vested in borrower’s name. Should an appraisal be a loan requirement, applicants pay half of the fee (approx. $350–$450); all other application fees are covered by Salal. Credit Union membership is required. Consult a tax advisor regarding the deductibility of interest. Salal Credit Union NMLS #416045.
Rates are current as of February 1st, 2023.