When you need access to cash, your home equity might feel like an obvious place to look. According to the ICE Mortgage Monitor report from June 2025, 48 million U.S. homeowners have tappable equity, with the average homeowner sitting on $212,000 in accessible home equity.
Whether you’re planning a major home improvement or trying to get a handle on higher-interest consumer debt, many homeowners turn to HELOCs (home equity lines of credit) because they offer flexibility and typically lower interest rates than options like personal loans or credit cards.
Still, variable rates and payment increases during the repayment period can catch borrowers off guard. The good news: a HELOC isn’t your only option. Several HELOC alternatives may better align with your needs and future goals.
Let’s walk through the options together and break down when each one makes sense.
Why should you consider HELOC alternatives?
A home equity line of credit (HELOC) is a revolving credit line that lets you borrow against the equity in your home. It works a bit like a personal loan, but with your home as collateral. You’re approved for a maximum credit limit and may draw as needed during the initial draw period, which is usually between 5 and 10 years.
During the draw period, you’ll make payments to cover the interest. Once the draw period ends, the HELOC enters the repayment period, when you start paying back both principal and interest on the loan. For many homeowners, this flexibility is pretty appealing.
HELOCs may be useful for ongoing expenses, such as phased home renovations or unpredictable costs, and you only borrow what you need, which may explain why demand is rising. In May of 2025, 28% of American homeowners said they were considering one in the next 12 months, a 7% increase from 2022.
That said, the same features that make HELOCs attractive may also introduce uncertainty.
With a HELOC, interest rates are variable, which means monthly payments may increase over time. And when the draw period ends, payments can jump significantly as you begin to pay both the interest and the principal—a shift that catches some borrowers off guard.
For instance, a borrower with a $50,000 balance might see their monthly payment increase from $200 (interest-only) to $700+ per month when the repayment period begins.
That’s why it’s worth looking beyond HELOCs. Depending on your age, income, how much equity you have, and whether you want to make monthly payments, another financing option may be a better fit.
The chart below compares several common HELOC alternatives and highlights when each one tends to be a good fit. We’ll explore each in more detail in the next sections.
| Financing option | Often a good fit when you want to… |
| Home equity loan | Cover a large, one-time expense with predictable payments |
| Reverse mortgage | Access home equity without adding monthly bills* |
| Cash-out refinance | Replace an existing mortgage and pull out cash |
| Home-sale leaseback | Tap equity while continuing to live in your home |
| Personal loan | Get fast funding without using your home as collateral |
| Credit card | Pay for smaller, short-term expenses |
| Home equity sharing agreement | Access cash without taking on new debt |
*The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
Now, let’s look at seven HELOC alternatives, including when they may be a better option.
1. Home equity loan
A home equity loan lets homeowners borrow a one-time lump sum using the equity in their home as collateral. Unlike a HELOC, which provides ongoing access to funds (that’s the “line of credit” in HELOC), this option is more straightforward: borrowers receive loan proceeds upfront and repay them over a set term with monthly mortgage payments.
The interest rate for a home equity loan is typically fixed, so your monthly mortgage payment usually stays the same. Many homeowners prefer this option when they know exactly how much money they need and want predictable payments.
When is a home equity loan a good fit?
A home equity loan is often a good option if you:
- Have a clear, one-time expense, such as a major home improvement or large repair
- Prefer predictable monthly mortgage payments and a fixed interest rate
- Have steady income and feel comfortable committing to regular payments
- Want to consolidate higher-interest debt into a single loan
When is a home equity loan not a good fit?
This option may not be ideal if you:
- Need ongoing or flexible access to funds over time
- Want to avoid taking on a new monthly payment right away
- Expect income changes that could make fixed payments more difficult
- Feel uneasy about using your home as collateral
Finance of America does not currently offer home equity loans.
2. Reverse mortgage
A reverse mortgage allows older homeowners to access their home equity without making monthly mortgage payments. Instead of paying the lender, funds are disbursed to the borrower, and the loan balance grows over time. Reverse mortgages are typically repaid when the home is sold, the homeowner moves out, passes away, or no longer meets loan obligations.
Homeowners often choose this option when they want financial flexibility without adding another monthly bill. Borrowers may receive payouts as a lump sum, monthly payments, a line of credit, or a combination of these options. Generally, the home is sold to repay the loan, but heirs may also choose to repay it out of personal funds to keep the house.
In practice, getting a reverse mortgage might look like this:
Linda is 68 and owns a home valued at about $400,000. She lives on a fixed income and wants financial flexibility to help cover everyday expenses. With a reverse mortgage, she chooses to access a portion of her home equity and chooses to receive $1,200 per month, allowing her to cover daily expenses while staying in her home and without taking on a new monthly mortgage payment.
The right to remain in the home is contingent on paying property taxes and homeowners insurance, maintaining the home, and complying with the loan terms
–>Learn more: Reverse mortgage eligibility requirements
When is a reverse mortgage a good fit?
A reverse mortgage is often considered by homeowners who:
- Are age 62 or older (or 55+ for proprietary reverse mortgages) and live in their home full-time
- Want to access equity without monthly mortgage payments
- Plan to stay in their home for the long term
- Need flexibility to pay for everyday expenses, healthcare, or retirement needs
The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
To learn more, please visit the CFPB’s Reverse Mortgage: A Discussion Guide.
When is a reverse mortgage not a good fit?
It may be less suitable if you:
- Expect to move within the next few years
- Want to preserve the maximum amount of home equity for heirs
- Feel uncomfortable with a loan balance that increases over time
- May struggle to keep up with property taxes, insurance, or maintenance
3. Cash-out refinance
A cash-out refinance replaces an existing mortgage with a new, larger one and allows the borrower to take the difference in cash. Instead of adding a second loan, everything rolls into a single mortgage with one monthly mortgage payment.
This option often appeals to homeowners who are locked into higher mortgage rates or want to simplify their finances while accessing a sizable amount of equity. Because you’re refinancing the entire mortgage, the loan term typically resets, which may lower or raise your monthly mortgage payment depending on rates and terms.
Here’s how it might work in practice:
Sue owes $260,000 on her mortgage, and her home is now worth about $450,000. She refinances into a new $320,000 mortgage, pays off the original loan, and takes $60,000 in cash. She uses the funds to remodel her kitchen and consolidate some higher-interest debt, all while keeping a single monthly mortgage payment.
When is a cash-out refinance a good fit?
A cash-out refinance may make sense if you:
- Want to access a large amount of equity at once
- Can secure a similar or lower interest rate than your current mortgage
- Prefer one mortgage payment instead of managing multiple loans
- Plan to stay in your home long enough to offset closing costs
When is a cash-out refinance not a good fit?
This option may be less appealing if you:
- Have a low interest rate you don’t want to give up
- Need only a small amount of cash
- Expect to move in the near future
- Want to avoid resetting your mortgage term or increasing total interest paid
4. Home-sale leasebacks
A home-sale leaseback is an arrangement in which a homeowner sells their home to an investor or company to access a portion of their equity in cash while continuing to live in the home as a renter. Instead of borrowing against your home, you’re converting equity into cash through a sale and then signing a rental agreement to stay in the house.
Homeowners who want to unlock a large amount of equity quickly and aren’t concerned about long-term ownership typically consider this option. Because it isn’t a loan, there are no interest charges or monthly loan payments, though you will pay rent and give up any future appreciation.
When is a home-sale leaseback a good fit?
A home-sale leaseback may make sense if you:
- Want to access a large amount of equity quickly
- Don’t want to (or can’t) qualify for a traditional loan
- Are comfortable transitioning from owner to renter
- Need cash but want to remain in your home for now
When is a home-sale leaseback not a good fit?
This option may be less appealing if you:
- Want to keep long-term ownership of your home
- Are concerned about rising rent or lease terms
- Plan to stay in the home for many years
- Want to benefit from future home value appreciation
5. Personal loan
A personal loan is an unsecured loan, meaning it doesn’t require a home or other assets as collateral. Instead, the borrower’s credit score and overall financial health factor into the loan approval and terms. You receive the funds as a lump sum and repay them over a fixed term with set monthly payments, usually at a higher interest rate than home equity-based options.
Because your home isn’t involved, personal loans often appeal to homeowners who want quick access to cash without tapping their equity. They’re commonly used for smaller projects, short-term needs, or expenses where speed matters more than long-term costs.
When is a personal loan a good fit?
A personal loan may make sense if you:
- Want funding quickly with minimal paperwork
- Prefer not to use your home as collateral
- Need a relatively smaller amount of money
- Value predictable monthly payments over the lowest possible rate
- Have a decent credit score
When is a personal loan not a good fit?
This option may fall short if you:
- Need a large amount of cash
- Want the lowest possible interest rate
- Plan to repay the loan over a long period
- Are already carrying significant high-interest debt or have poor credit
6. Credit card
Using a credit card is one of the simplest ways to access credit, and for some homeowners, it can be a temporary alternative to tapping home equity. Credit cards don’t require collateral, and you can use them immediately for purchases or unexpected costs.
But that convenience comes at a price. Credit cards typically carry much higher interest rates than home equity-based options, which makes them better suited for short-term needs rather than larger or ongoing expenses.
When is a credit card a good fit?
A credit card may make sense if you:
- Need to cover a relatively small expense fast
- Have the ability to pay off the balance quickly
- Want flexibility without a loan application
- Have access to a low-interest or promotional offer (for example, if you need to hit a certain spend for a sign-on bonus)
When is using a credit card not a good idea?
A credit card may not be the best option if you:
- Need a large amount of money (More than a few thousand dollars)
- Expect to carry a balance for an extended period, as credit cards have higher interest rates
- Are already managing high-interest credit card debt
- Want predictable repayment and lower overall borrowing costs
7. Home equity-sharing agreement
The last HELOC alternative is a home equity-sharing agreement. This agreement allows a homeowner to receive cash upfront in exchange for giving an investor a share of the home’s future value. Instead of making monthly payments or paying interest, repayment typically happens when the home is sold or refinanced, or after a set period of time.
These agreements are far less common than traditional home equity loans, HELOCs, or reverse mortgages, and availability varies by location and provider. Because this option doesn’t involve monthly payments, it’s sometimes considered by homeowners who want access to equity but prefer not to take on additional debt.
That said, there is a long-term trade-off. If your home increases in value, the amount owed to the investor increases as well, which may significantly reduce the equity you keep later.
When is a home equity-sharing agreement a good fit?
This option may be worth exploring if you:
- Don’t want to make monthly payments
- Don’t qualify for traditional home equity products
- Are comfortable sharing future home appreciation
- Plan to sell or refinance within a defined time frame
When is a home equity-sharing agreement not a good fit?
It may not be a good choice if you:
- Want to keep full ownership and future appreciation
- Plan to stay in your home for the long term
- Feel uncertain about how much your home’s value may grow
- Prefer more established or widely available financing options
HELOC alternatives: Pros and cons at a glance
Here is a quick overview of the top pros and cons of the HELOC alternatives we’ve looked at.
| Product | Top Pros | Top Cons |
| HELOC | ✓ Flexible access ✓ Interest-only payments initially ✓ Generally lower interest rates than credit cards | ✗ Variable rates ✗ Payment shock after draw period ✗ Foreclosure risk if loan terms aren’t met. |
| Home equity loan | ✓ Fixed rate ✓ Predictable payments ✓ Lower interest rates than some other credit options | ✗ Lump sum only ✗ Home at risk ✗ Closing costs |
| Reverse mortgage | ✓ No monthly mortgage payments* ✓ Stay in home** ✓ No credit requirement ✓ Flexible payout options | ✗ Reduces inheritance ✗ High upfront costs ✗ Age requirements (62+ for HECM) |
| Cash-out refinance | ✓ One loan payment ✓ Potentially lower rate ✓ Large amount | ✗ Resets mortgage term ✗ High closing costs ✗ May increase total interest paid over life of the loan |
| Personal loan | ✓ No collateral ✓ Fast funding ✓ Fixed payments | ✗ Higher interest rates compared to some other options ✗ Smaller loan amounts ✗ Credit score dependent |
*The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
**The right to remain in the home is contingent on paying property taxes and homeowner’s insurance, maintaining the home, and complying with the loan terms
How to choose the right HELOC alternative for you
With so many HELOC alternatives, making a decision can feel overwhelming. The truth is, the “right” option comes down to your current situation and future needs. Asking the right questions may help you narrow down your choices.
Do you meet the age and eligibility requirements?
Some HELOC alternatives we discussed are only available to certain homeowners. Reverse mortgages, for example, require you to be at least 62 (or 55+ for some proprietary reverse mortgage loans) and live in the home as your primary residence.
There are also ongoing fees and costs to consider. Other options focus more heavily on credit score, income, or debt levels. Understanding what you’re eligible for early helps set realistic expectations.
→ Learn more: What fees do you pay with a reverse mortgage?
How much equity do you have in your home?
The amount of equity you’ve built plays a major role in which alternatives are available and how much you can access. Options like cash-out refinancing, reverse mortgages, and equity sharing typically require substantial equity, while personal loans and credit cards don’t rely on home value at all.
→ Learn more: How much equity do you need for a reverse mortgage?
Do you want or need to make monthly payments?
This question alone can quickly narrow down your options. Some homeowners prefer predictable monthly payments and a clear payoff timeline. Others prioritize cash flow and want to avoid adding a new monthly obligation, especially in retirement or during periods of income uncertainty.
How stable is your income and cash flow?
If your income is steady, making monthly payments may feel manageable. If income fluctuates or has slowed in retirement, alternatives with deferred repayment or flexible disbursement may offer more breathing room.
What will the money be used for?
One-time expenses, such as a major home improvement or medical bill, often pair well with lump-sum options. Ongoing or unpredictable expenses may call for a different approach. Clarifying goals can make it easier to select a finance option that meets your needs.
How long do you plan to stay in your home?
Some options, like a reverse mortgage, come with upfront costs that only make sense if you plan to stay put for several years. Other options, like a personal loan, may be better suited to shorter-term plans or homeowners who expect to sell or move in the next few years.
How sensitive are you to interest rate changes and fees?
Some options we’ve covered have variable interest rates, which means payments or loan balances may change over time. Others come with upfront expenses like closing costs and ongoing fees that affect the total cost of borrowing. Looking beyond the initial rate to consider the true cost of borrowing can help you compare options more effectively.
How important is it for you to keep full ownership of your home?
For some homeowners, maintaining full ownership and future appreciation is essential. For others, accessing equity now may take priority over what happens years down the line. There’s no right or wrong answer—just an honest one.
Final thoughts: You have multiple options to cash out home equity
Accessing home equity can be a powerful way to fund a variety of needs, from home improvements to debt management to covering medical expenses. With options like home equity loans, HELOCs, reverse mortgages, and cash-out refinance, homeowners have multiple ways to unlock the value in their property.
Each option comes with its own set of advantages, costs, and repayment terms, so take the time to carefully evaluate your financial situation, goals, and comfort with risk before making a decision. And, if home equity isn’t the right fit, options like personal loans can be considered.
Wondering how much you could be eligible for with a reverse mortgage?
→Try our reverse mortgage calculator and get an estimate in just two minutes.
Frequently asked questions about HELOC alternatives
Is a HELOC the right choice to fund home improvements?
A HELOC may work well for home improvements if you want ongoing access to funds and feel comfortable with variable interest rates. This type of loan is well suited for projects completed in phases, where costs unfold over time. That said, if you prefer predictable payments or know the full cost upfront, a home equity loan or cash-out refinance may feel more manageable.
Are there better options than a HELOC?
There isn’t a single “better” option for everyone. The right choice depends on factors like how much equity you have, whether you want to make monthly payments, and how long you plan to stay in your home. Home equity loans, reverse mortgages, cash-out refinancing, and even non-home equity options may be better aligned with your goals.
Can you lose your home with a HELOC?
Yes, in some cases. Your home secures a HELOC, so if you fail to meet the loan obligations, such as making required payments or keeping up with property taxes and insurance, foreclosure is possible. Understanding the repayment structure and your long-term ability to pay is essential before borrowing.
What is the cheapest way to borrow against home equity?
The lowest-cost option often depends on interest rates, fees, and how long you keep the loan. Cash-out refinancing may offer lower rates if you can secure favorable terms, while home equity loans and HELOCs often have lower rates than unsecured borrowing. Looking at the total cost over time—not just the interest rate—helps provide a clearer comparison.
Is HomeSafe Second a better choice than a HELOC?
HomeSafe Second is a proprietary reverse mortgage (not a HECM) designed for eligible homeowners (generally age 55 or older, depending on state requirements) who want to access home equity without making monthly mortgage payments. For eligible homeowners who prioritize cash flow stability over flexible access, it may be a better fit than a HELOC. As with any option, comparing how each structure aligns with your financial goals is key.
