10 Things You Should Know About Tapping Home Equity
Making the roof over your head money in your pocket.
Homeowners age 62 and older hold almost $15 trillion in home equity, nearly double the total of early 2020, according to data from the National Reverse Mortgage Lenders Association. If you own your home or another property, you have another financial resource for renovations, debt consolidation, extra income or even a business investment. But accessing that value is not as simple as withdrawing cash from the bank or selling shares in a retirement account.
"Using home equity is a puzzle," says Ashley Morgan, a debt attorney in Chantilly, Va. "It goes beyond whether you can afford to take the money out. You also need to consider how that decision fits with your future financial and housing goals."
Whether you need extra money now or simply want to understand the possibilities, here's what you should know about using home equity in retirement.
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1. There are multiple ways to tap home equity.
Home equity is the portion of a property's value that you own outright. In other words, it's what you would receive if you sold, after paying any remaining mortgage debt and transaction costs.
Selling is the simplest way to cash out your equity, but there are other ways to access that value while staying in your home, each with its own tradeoffs.
The right option depends on what you need the money for, whether you can afford ongoing loan payments and whether the property still fits how and where you want to live in retirement.
2. A HELOC provides borrowing flexibility.
With a home equity line of credit (HELOC), you receive a borrowing limit based on the value of your property. You decide when and how much to draw, and typically owe interest only on the amount borrowed. After you repay the balance, that credit generally becomes available to borrow again.
"A HELOC gives you the ability to prepare for future expenses or cover projects that happen in multiple stages," says Fabien Thierry, head of home equity lending at Citizens Bank. However, HELOCs typically charge adjustable interest rates, so the monthly payment can change.
3. A home equity loan makes sense for a specific need.
A home equity loan provides a lump sum of cash upfront, which you repay on a set schedule, usually with a fixed interest rate and monthly payments.
Interest begins accruing on the full amount immediately, and some loans charge a prepayment penalty if you repay early. Home equity loans can work well for a specific expense, such as a major renovation or accessibility upgrade.
In a 2026 Citizens Bank survey of homeowners, 44% said renovating their property to fit their needs better was their most realistic housing option. Just 13% said buying another home felt achievable.
4. Borrowing against your home equity is affordable, but carries extra risk.
Home equity loans and HELOCs use your house as collateral. Interest rates for home equity loans and HELOCs averaged about 8%, compared with 12% for unsecured personal loans and nearly 20% for credit cards, according to a national Bankrate survey of lenders in June 2026.
The tradeoff is that if you fail to make the scheduled payments, the lender could eventually foreclose on your home.
5. A reverse mortgage lets you stay in the home without monthly loan payments.
A federally insured Home Equity Conversion Mortgage is available starting at age 62. You can receive the money as a lump sum, installment payments or as a line of credit.
Interest and fees are added to the loan balance over time. The balance becomes due when you sell the property, move out permanently or pass away. However, your heirs will not owe more than the property's value if the loan balance grows beyond it.
You must continue to cover property taxes and insurance, and keep the home in good condition. Otherwise, the lender could foreclose on the home.
6. Home equity investments offer cash, but at a high price.
With a home equity investment (HEIs), also known as a home equity sharing agreement, you sell a percentage of your equity to an investor. You get cash upfront and don't owe ongoing loan payments. Instead, the investor collects when you sell or refinance the home later.
These deals have grown more popular as homeowners look for ways to tap their equity without adding another monthly bill. Because the cost is deferred and tied to the home's future value, they can feel far less expensive than they are.
Here's an example: A homeowner receives $50,000, equal to 10% of a $500,000 home's value. They would owe $110,000 after 10 years if the property appreciates at 1.5% annually, or $187,000 if it appreciates at 5.5% annually, based on estimates from Point, an online provider of HEIs. Processing and other fees can also reduce the cash you receive.
By comparison, a 10-year home equity loan for the same amount at an 8% interest rate would cost about $73,000 to repay. "The seller may not realize how much upside they are giving away," says Luca Rassenti, a financial adviser in Tucson, Ariz.
7 Compare your options.
When borrowing against the equity in your home, compare offers from several lenders before committing. "Look at the rate, the support during the application process and how quickly you can get the money," says Thiery from Citizens Bank. Many banks offer online calculators that can give you an initial estimate of the rate and monthly payment.
Shopping around also matters for reverse mortgages and home equity investments, where fees and contract terms vary considerably.
Use the Bankrate tool below to explore and compare today's top refinance offers:
8. Selling unlocks your equity, but costs can add up.
Selling is the most direct way to access all your home equity. Downsizing to a less expensive property can also free up cash and reduce future housing costs.
However, you will lose value due to transaction costs and taxes, typically running up to 10% of the property for selling and 5% for buying another one, according to Zillow. So price out the full cost of the move before counting on a large amount of extra cash.
Single homeowners can exclude up to $250,000 of profit from their taxes for the sale of a primary residence, or $500,000 for a married couple filing jointly, as long as you (or your spouse) have lived in the home for two out of the last five years. "If you've owned a house for many years, you could have a substantial taxable gain," says Morgan, the debt attorney from Virginia.
9. Saving equity prepares for future needs.
Untapped home equity can serve as a reserve for later costs, including assisted living or long-term care. About 80% of 65-year-olds will need long-term care at some point, according to the Center for Retirement Research, and costs can run over $100,000 per year.
Before tapping your equity for a less urgent expense, consider whether other savings or assets could cover it and preserve that buffer.
10. Include your heirs in the plan.
When you pass away, your real estate receives a step-up in basis to its market value at that time. That means your heirs could sell it without owing taxes on the appreciation during your ownership.
If you need cash, Rassenti suggests asking your heirs whether they would provide a loan or gift today, with the expectation that they will inherit the property later. They may also have emotional reasons for wanting to keep a longtime home in the family. "Talk to the kids about what matters to them," says Morgan.
Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that's right on the money.
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