Motley Fool Money

Episode: How to Factor Home Equity Into Your Financial Plan

Date: August 23, 2025
Host: Robert Brokamp
Guest: Matt Frankel, Motley Fool Contributor & Certified Financial Planner

Overview

This Saturday edition of Motley Fool Money dives into how Americans should approach home equity within their financial strategy. Host Robert Brokamp and guest Matt Frankel, CFP, discuss practical ways to turn home equity into cash, options available to homeowners, strategic pros and cons, and the evolving housing market. The discussion moves from broader personal finance news—touching on car insurance inflation and consumer habits—to an in-depth breakdown of home equity’s role in comprehensive financial planning.

Key Discussion Points & Insights

1. Stock Market Rally & Investment Trends (00:06–02:49)

• Since President Trump’s tariff pause on April 8, the S&P 500 is up 29% (as of Aug. 18).
• Big winners: speculative indexes—Goldman Sachs Non-Profitable Tech, Most Shorted Index, UBS Meme Basket (returns >60%).
• Blue-chip dividend stocks lag far behind, indicating investor appetite for risk and growth.
• “For the first time ever, the 10 largest companies now make up 40% of the S&P 500.”
  —Robert Brokamp (02:09)

2. Car Insurance Costs Soaring (02:49–04:44)

• Average annual car insurance: $2,700 (+60% over five years).
• More advanced (and expensive) car technology, shortage of mechanics, greater frequency of weather-related claims.
• Savings tip: Reduce coverage on older/high-mileage cars, comparison shop for discounts, redirect those savings into a high-yield account.
• “Green estimates that you could save up to $1,800 a year by reducing your coverage, which you should then put in a high-yield savings account...”
  —Robert Brokamp (04:30)

3. Americans Choosing Smaller Portions (Kids’ Meals) (04:44–05:14)

• 44% of adults order kids’ meals to save on cost/calories; influenced by trends such as GLP-1 appetite suppressants.
• McDonald’s to lower value meal costs later this year in response to customer dissatisfaction.

Main Interview: How to Factor Home Equity Into Your Financial Plan (05:15–17:52)

Home Equity: The Asset, the Liability, and the Opportunity (05:15–06:39)

• Home is often a family’s largest asset, but it's illiquid and can carry substantial maintenance and liability risk.
• U.S. homeowners collectively sit on a record $35 trillion in home equity.

“Your home plays a unique and multifaceted role in your personal finances. ... If your home has a mortgage, then it’s also a liability ... But it’s also a resource. In fact, for many Americans, their home is their biggest asset.”
—Robert Brokamp (05:15)

Home Equity’s Growing Value and Liquidity (06:39–07:38)

• Median home price: $443,462 (July 2025); average equity with a mortgage: ~$330,000.
• Home values up 52% in five years.
• Technology and streamlining have made accessing home equity easier than in the past.

“Homeowners in the United States are sitting on $35 trillion of equity altogether. ... Technology is making it a little bit more liquid than it used to be.”
—Matt Frankel (06:39)

Options for Leveraging Home Equity (07:38–09:35)

1. Home Equity Loan (Second Mortgage):

   • Fixed rate, term loan, lump sum.
   • Second in priority to the main mortgage.

2. Home Equity Line of Credit (HELOC):

   • Functions like a flexible credit card, borrow as needed up to a limit.
   • Interest paid only on funds used; typically variable rates.

3. Reverse Mortgage:

   • For ages 62+, lender pays homeowner, usually monthly or in a lump sum.
   • Higher upfront costs/fees, but “if the loan grows to the point where it’s actually bigger than the value of the house, you don’t have to make up the difference.”
     —Robert Brokamp (10:55)

“Reverse mortgage ... instead of you making payments to the bank in exchange for building your equity ... the bank makes payments to you. ... That could be payments, it could be a lump sum.”
—Matt Frankel (08:23)

Pros and Cons of Borrowing Against Home Equity (09:35–11:10)

• Home Equity Loan: Good for planned expenses (e.g., renovations), predictable payments.
• HELOC as Emergency Fund: Once reliable for retirees, but banks can and have called loans during downturns.
• Reverse Mortgages: High fees, last-resort strategy for retirement income; never owe more than the value of the house.

Responsible Uses for Home Equity (11:11–13:07)

• Not for “elaborate vacation” or speculative investing (e.g., crypto).
• Smart uses: Renovations (potentially tax-deductible), paying high-interest debt, funding education, investing in real estate.
• Can serve as source for a down payment on rental/investment property.

“Home equity is not your piggy bank. ... If you’re thinking of pulling out all your home equity and investing in cryptocurrencies, probably not the best idea.”
—Matt Frankel (11:52)

Downsizing, Relocation, & Room Rentals (13:07–15:42)

• Downsizing can unlock equity and reduce cost of living.
• Relocating to a lower-cost area compounds monthly savings.
• Renting out spare rooms: over 60% of U.S. homes now have one, an option for generating retirement income or covering expenses.

“If you have a house that’s comfortable for your entire family, it’s worth $700K, you owe $300K ... sell your house, you have $400K cash to buy a smaller place, and then you live mortgage free.”
—Matt Frankel (14:40)

Personal Planning Approaches (15:07–16:08)

• Brokamp: Views home equity as a “big fat emergency fund” and long-term care backup.
• Frankel: Plans to downsize to reduce square footage and maintenance as he ages.

Current State of the Housing Market (16:08–17:47)

• Market shifting toward buyers: more inventory, flat sales.
• Home prices up over the year, but have declined slightly in recent months.
• Mortgage rates are main factor in affordability; a 2% rate drop is as impactful as a 20% price cut.

“Mortgage rates have a lot more to do with home affordability than even prices themselves. Did you know that a roughly 2 percentage point reduction in a mortgage rate is equal to a 20% price reduction in your home in terms of your mortgage payment each month?”
—Matt Frankel (17:10)

Notable Quotes & Memorable Moments

• “Your home plays a unique and multifaceted role in your personal finances.”
  —Robert Brokamp (05:15)

• “Home equity is not your piggy bank. ... Probably not the best idea.”
  —Matt Frankel (11:52)

• “We love our house, so we plan to live here for as long as we can. ... It is our backup ... for extraordinary long-term care.”
  —Robert Brokamp (15:07)

• “If you live until you’re 100 years old, a reverse mortgage could definitely work out in your favor...”
  —Matt Frankel (10:56)

Additional Highlight: The Great Wealth Transfer (18:23–end)

• $84 trillion expected to pass from Baby Boomers to Gen X and Millennials in coming 20 years; majority is highly concentrated.
• Action item: Update wills, beneficiary designations, and estate plans to avoid complications and expenses.

“The biggest wave of wealth in history is set to pass for baby boomers over the next 20 years, and it’s going to have a huge impact on those who stand to inherit it. ... The key to making the most of this wealth transfer is having an updated estate plan.”
—Robert Brokamp (18:23)

Timestamps for Key Segments

• Stock Market Rally & Winners/Losers: 00:06–02:49
• Car Insurance Cost Spike: 02:49–04:44
• Consumer Trends/Kids Meals: 04:44–05:14
• Home Equity in Personal Finance: 05:15–07:38
• Accessing Home Equity (Loan, HELOC, Reverse Mortgage): 07:38–11:10
• Smart Uses for Equity, Common Mistakes: 11:11–13:07
• Downsizing, Renting Rooms, Cost of Living: 13:07–15:42
• Personal Strategies: 15:07–16:08
• Housing Market Update: 16:08–17:47
• Great Wealth Transfer & Estate Planning: 18:23–end

Summary

This episode offers a comprehensive overview for anyone considering how home equity fits into their broader financial picture. With data-driven analysis and actionable advice, the hosts explore both the mechanics and the personal dimensions of using home equity, emphasizing responsibility, strategy, and long-term planning—delivered through an engaging, approachable conversation.