These days, any time baby boomers get together, chances are good that the topic of real estate will come up in conversation. Recent studies suggest that more than three-fourths of this huge generation, now between their mid-fifties and their mid-seventies, are home-owners, and as they retire (or approach retirement) the question of whether to sell, and when, looms large in their planning. Recently we came across this article on the Money website, written by real estate writer Aly Yale, who looks at the topic of baby boomers and home equity, and explains how many of these equity-rich homeowners are facing a dilemma about what their next steps in housing ought to be.

Home Equity in the U.S. Now Exceeds $8 Trillion

Yale starts by considering a Chicago couple, both in their late 50s, who seized their chance to cash in and make a move. “Patti and Mike M. knew the housing market was hot,” she writes. “So, in July, they sold their 5,000-square-foot Chicago-area home for a tidy profit and headed south, leaving snowy winters and an annual $24,000 property tax bill behind.” This couple chose to move to a smaller home in South Carolina. Besides summer sun and mild winters, they also figured they’d be saving $3,000 off their monthly housing costs, giving them the flexibility to retire early. “We sold at a great time,” wife Patti told Money.

“She’s likely right,” Yale writes. “Home prices have been on a tear lately, rising 18 percent in just the last year. It has homeowners sitting on unprecedented amounts of equity — about $8.1 trillion of it, in fact.”  And as the Money article points out, baby boomers like the Chicago couple, Patti and Mike, are the ones poised for the most significant gains. “These homeowners have often lived in their homes for decades,” says the article, “and, in many cases, paid off their mortgages completely.”

Home Owners Are Asking, “What Should We Do?”

The skyrocketing home prices and expanding equity is keeping realtors like Dana Bull of Marblehead, Massachusetts, extremely busy. “Every single friend of mine, all of their parents are calling me, asking ‘Dana, what should we do?’” she told Money. “They know they’ve got a unique opportunity where their properties have appreciated so much to a point that they never even thought possible in their lifetime.”

If that’s the question you’re asking right now – if you’re a baby boomer wondering how to best use your rising home equity – the Money article provides three basic options. The one you pick depends on your circumstances. Let’s take a look.

Option #1: Sell – but Then What?

“Selling is likely first to mind for many older homeowners,” says Yale in her Money article. She quotes data that pegs the average profit from a home sale today at $94,500 – a jump of $34,000 in one year!  “Those profits can help boomers achieve any number of financial goals, from padding their nest eggs or making investments to buying a new house or even retiring early.” Because millions of boomers are getting close to retirement, selling now represents a “sweet spot” that can speed along their retirement plans with a once-in-a-lifetime cash boost.

“According to a survey from Realtor.com, around 12 percent of baby boomers plan to sell their homes in the next year,” Yale writes. That’s the largest share of all generation surveyed. But the question for a huge number of these home sellers will be – “Then what?” Some will choose to rent, while others may decide to downsize or to move to their dream community. But many markets are experiencing a tight rental market, while those looking to buy may encounter a host of challenges.

“If you choose to buy, agents say proceed with caution,” says the Money article: “By going this route, you’ll face the same high prices you just capitalized on. Supply is also limited in most housing markets, so you may find yourself with few homes to choose from — not to mention some stiff competition.” The important thing, say brokers, is not to sell without a clear plan for your next move. As one realtor put it, boomers “may get a premium for their current home, [but] they will also pay a premium for their next home while also facing very limited choices. To sell fast without a clear plan could end up being costly over the long term.”

Option #2: Stay Put, and Tap Your Equity for Needed Cash

“Selling your house isn’t the only way to capitalize on the hot housing market,” says Yale. “You can also tap your equity using financial products like home equity loans, home equity lines of credit (HELOCs) or a cash-out refinance.” By using these tried-and-true financial options, homeowners can turn a portion of their equity into cash, then use that cash as they see fit: paying off debt, fixing their home to age in place, or indulging in that dream vacation. Some people even use cash from home equity to help delay filing for Social Security benefits.

Choosing to tap equity without selling will allow you to save on capital gains tax, which is levied on profits from the sale that exceed $500,000 for married couples or $250,000 for singles. Through a HELOC or other home equity loan, you can find the cash to purchase long-term care insurance or make a contribution to a grandchild’s college fund.

But there’s a significant downside: all these loans – home equity loans, HELOCs, and cash-back refinances – require a monthly payment. If you’re planning to retire on a fixed or limited income, make sure you do some careful planning before taking on an added monthly obligation that can torpedo your budget. A financial dashboard is an indispensible tool here.

Option #3: Consider a Reverse Mortgage — but Do Your Homework

By now, most homeowners 62 years old or older probably realize that they likely qualify for a home equity conversion mortgage (HECM), better known as a reverse mortgage. “These work like a mortgage loan, only backward,” says Money. “With these loans, the lender pays you — often monthly, and then collects the total balance plus interest once you die or sell the house.”  Reverse mortgage proponents like Steve Resch of a company called Finance America Reverse argue that now is a particularly good time to get a reverse mortgage if it suits your goals.

“The proceeds that you can get from a reverse mortgage are determined by the homeowner’s age, the value of the property and the interest rates,” Resch told Money’s Yale. “So, we’ve got record-high home values and record-low interest rates, which means a borrower can really get a tremendous amount of money — much more so than they could just a couple of years ago.” With a reverse mortgage, homeowners retain title to their house and make no monthly payments, although taxes, insurance, and upkeep remain their responsibility.

Those who opt for a reverse mortgage find there are at least three ways to structure their payments. Some choose to take a lump sum, while others opt for a regular monthly payment. The best choice, however, may be a line of credit that homeowners can draw on as the need arises. This line of credit typically grows over time. So, too, does the loan balance, since it accrues interest. When you sell the home, you or your heirs pay back the loan amount.

There are other unique aspects to an HECM, so we agree with the Money article’s advice to talk to a financial advisor before taking out a reverse mortgage. Let them explain the implications and risks of these loans and show you how an HECM might impact your retirement goals.

Money Says “The Time is Now” – but Is It?

The Money article ends with the general alert that now is the time for baby boomers to act, and perhaps it is. “Whatever you decide to do, experts say you should make your move fast,” Yale writes. “Recent data shows for-sale inventory is rising (at least slightly), and when you throw in slowing demand from burned-out buyers, it seems the red-hot market may soon be cooling off.” As one Wisconsin realtor told Money, “In many markets, sanity is returning, and the level of competition is softening. Prices tend to rise, plateau and then fall. Many are sensing we are headed into a plateau phase.”

While that could be true, we here at AgingOptions would caution homeowners not to act recklessly. Unless you have a housing plan in place as part of your overall retirement plan, a premature sale may find you scrambling for a place to live. Instead, we’ll show you how your housing decisions can be part of a much bigger retirement picture.

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(originally reported at https://money.com)