As retirement approaches, many homeowners start asking an important question: How can I make the most of my home’s value to support a comfortable and secure future?
For many, home equity—the portion of the home you own outright—is one of the largest financial assets they have. Tapping into that equity can be a smart way to fund retirement goals, cover unexpected expenses, or simply boost financial stability.
In this guide, we’ll explore five practical ways retirees can access their home equity, including the pros and cons of each method. Whether you’re planning ahead or already in retirement, understanding these options can help you make well-informed, confident decisions.
1. Downsizing: Simplify Your Space, Unlock Your Equity
One of the most common ways to tap into home equity is by downsizing—selling your current home and moving into a smaller, more affordable one.
If you’re living in a house that’s larger than you need, downsizing can provide a lump sum of cash that you can use for savings, travel, or covering health expenses. Plus, it can lower your ongoing housing costs, such as taxes and maintenance.
Benefits:
- Access significant equity
- Reduce living expenses
- Potentially relocate to a retirement-friendly area
For guidance on how to manage your housing choices in retirement, the U.S. Department of Housing and Urban Development (HUD) offers helpful resources for homeowners considering a move.
Considerations:
- Emotional attachment to your home
- Real estate market fluctuations
- Transition and moving costs
Downsizing can feel like a big step, but for many retirees, it’s a practical path toward financial freedom.
2. Reverse Mortgage: Stay in Your Home and Tap Into Its Value
If you’d prefer to stay in your home, a reverse mortgage may be an option worth exploring. Available to homeowners age 62 and older, this type of loan lets you convert part of your home equity into cash—without selling or making monthly payments.
Instead, the loan is repaid when the home is sold, the borrower moves out, or passes away.
Benefits:
- Stay in your home while accessing funds
- No monthly mortgage payments required
- Funds can be used for any purpose (healthcare, bills, etc.)
To learn more about how reverse mortgages work and who qualifies, check out the official page from the Consumer Financial Protection Bureau (CFPB).
Considerations:
- You must continue to pay property taxes, insurance, and maintenance costs
- Loan balance grows over time due to accruing interest
- May reduce the amount you leave to heirs
Reverse mortgages can offer peace of mind and financial breathing room—but they’re not right for everyone. It’s wise to speak with a HUD-approved housing counselor. You can find one using the HUD counselor locator tool.
3. Home Equity Loans and HELOCs: Borrow with a Plan
If you have strong credit and steady income, you might consider a home equity loan or a home equity line of credit (HELOC). These let you borrow against your home’s equity while retaining ownership.
- A home equity loan gives you a lump sum with a fixed repayment schedule.
- A HELOC works more like a credit card, offering a revolving credit line you draw from as needed.
Benefits:
- Competitive interest rates compared to other loans
- Flexibility in how you use the funds
- You maintain ownership of your home
For a helpful breakdown between these two loan types, visit the Federal Trade Commission (FTC) guide on home equity loans.
Considerations:
- Requires monthly payments
- Risk of foreclosure if you can’t repay
- HELOCs may have variable interest rates
This approach works best for retirees with dependable income and a clear plan for repayment.
4. Renting Out Your Home: Turn Equity into Income
If you’d rather keep your home than sell it, renting it out can be a smart way to generate monthly income in retirement.
Some retirees choose to rent out a portion of their home (such as a basement or ADU), while others relocate and rent out the entire property.
Benefits:
- Ongoing passive income
- Maintain ownership of a valuable asset
- Potential tax deductions for rental expenses
The IRS rental income guidelines can help you understand how rental income affects your taxes and what deductions you may be eligible for.
Considerations:
- Responsibilities of being a landlord
- Potential vacancy periods
- Maintenance and repair costs
If you’re comfortable managing tenants—or can hire a property manager—this can be a practical way to turn equity into reliable income.
5. Sell and Leaseback: Cash Out Without Moving Out (Yet)
A lesser-known but increasingly popular option is the sell-and-leaseback model. Here’s how it works: You sell your home to a buyer (often an investor or real estate firm) and lease it back from them—allowing you to access your home’s equity while continuing to live there.
Benefits:
- Immediate access to your home’s equity
- No need to relocate right away
- Flexible use of the cash for retirement goals
Programs like EasyKnock and Truehold offer sell-and-leaseback solutions tailored to seniors, but it’s important to read the fine print.
Considerations:
- You no longer own the home
- Future rent payments may rise
- Lease terms may limit long-term housing security
If you go this route, it’s strongly advised to consult with a financial advisor or real estate attorney to protect your interests and ensure the leaseback terms work in your favor.
Final Thoughts: Make the Most of Your Home Equity, Your Way
Your home isn’t just a place to live—it can also be a powerful financial resource in retirement. Whether you choose to downsize, take out a reverse mortgage, use a HELOC, rent your property, or try a sell-and-leaseback arrangement, there’s no one-size-fits-all approach.
The key is to align your choice with your financial goals, lifestyle preferences, and long-term plans.
Need help deciding?
- Talk to a HUD-approved housing counselor
- Explore AARP’s home equity resources
- Use calculators from CFPB to project costs and benefits
By making informed decisions and consulting trusted professionals, you can unlock the full potential of your home equity—on your own terms.
