Key Takeaways
- Home equity may help pay down higher interest debt, fund home improvements, support loved ones, or prepare for future expenses.
- Using home equity lines strategically may enhance financial flexibility and long-term security.
- Before borrowing, it’s important to understand your options, compare costs, and ensure the choice aligns with your financial goals.
If you’ve been feeling unsure about your financial future, the new year is a good time to reflect on your financial options and potential opportunities. And for many homeowners, financial flexibility might be waiting in their home equity.
When used thoughtfully, home equity may help you simplify your finances, strengthen your future, and move into the new year with more confidence. Here are five meaningful ways accessing your home equity may help you feel more comfortable, secure, and prepared for the new year—and beyond.
1. Pay higher-interest debt
Higher-interest debt—like credit cards or personal loans—may increase financial stress and limit your cash flow. Using your home equity to refinance or pay those balances may simplify your monthly budget.
However, different home equity options come with different pros and cons. A reverse mortgage eliminates those monthly payments, while a HELOC can help lower monthly payments and possibly save on interest.
In a reverse mortgage, the borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, 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.
–> Learn more about how a reverse mortgage works.
2. Create a safer, more comfortable home
Your home is more than a place to live—it’s the center of family celebrations and your future comfort. Using home equity to make upgrades could improve safety, accessibility, and efficiency. For example, adding handrails or walk-in showers, upgrading windows or insulation for better energy efficiency, or replacing outdated heating and lighting for greater comfort.
Each project enhances daily life and could also increase your property’s value. A warm, comfortable home is more than just a place to make memories—it may be an investment in your future.
3. Support family or give meaningful gifts
Home equity could help you create a lasting impact on your loved ones’ lives by funding opportunities or experiences. You might use a portion of your equity to help a grandchild with tuition, support an adult child’s home purchase, fund family travel, or contribute to charitable causes that are important to you.
Using your home’s value to give back or support loved ones could be one of the most rewarding financial decisions you make. The best gifts last far beyond the new year; they are an investment in the people and causes that matter most to you.
Learn how a HomeSafe Second mortgage may provide financial flexibility.
HomeSafe Second is a proprietary reverse mortgage loan product and is not related to the government-insured Home Equity Conversion Mortgage (HECM) program. Borrower must be 55 or older in most states.
4. Build a financial safety net for the future
Financial confidence comes from knowing you have options. By tapping into your home equity responsibly, you could establish a reserve for unexpected expenses such as medical costs, home repairs, or market downturns.
A home equity line of credit (HELOC), for example, allows you to access funds only when needed during a defined drawing period, so you’re prepared without taking on unnecessary debt. Having a financial cushion could make all the difference when life changes unexpectedly. Knowing you have resources to rely on may bring a sense of peace that lasts long after the new year.
Finance of America HELOC requires an initial minimum draw of the lesser of $50,000 or 75% of approved borrowing limit.
5. Support your family’s legacy
Your home has seen you through the years, and now it could play a key role in building your family’s financial legacy. Your home equity may be used to help supplement retirement cash flow, fund estate planning goals, or simply make life more comfortable for you and your loved ones.
For homeowners exploring long-term options, a reverse mortgage may offer another way to access home equity. This type of loan may help you maintain financial flexibility later in life without selling or taking on additional monthly mortgage payments.
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.
–>Thinking about how to plan for your family’s financial future? Explore our guide to starting estate planning conversations.
How to access your home’s equity
If you’re considering using your home equity, there are several options available, each designed for different financial needs and goals. Understanding how they work may help you choose the right fit for your situation. Here’s a brief explanation of some of your options:
Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit secured by your home, allowing you to borrow funds as needed up to an approved limit. HELOCs typically begin with a draw period, often lasting three to five years, during which you may access available funds, repay balances, and borrow again.
After the draw period ends, many HELOCs transition into a hold period, during which new draws are no longer available. During this phase, payments are often interest-only, though borrowers may choose to pay principal and interest to reduce the outstanding balance.
Following the hold period, the HELOC enters a repayment period, when the remaining balance is amortized and repaid through regular principal-and-interest payments over a set term.
For example, a HELOC might include a 3-year draw period, followed by a 7-year hold period with interest-only payments required, and then a 10-year repayment period where the balance fully amortizes. A HELOC may be a good option for homeowners seeking ongoing flexibility for projects, unexpected expenses, or longer-term cash flow management.
Home equity loan
A home equity loan provides a lump sum of money upfront, which you repay in fixed monthly installments over a set term. Because it typically comes with a fixed interest rate, your payment amount won’t change, making it easier to budget. This option may work best if you have a single large expense, such as major renovations or educational costs.
Finance of America does not currently offer home equity loan products.
Home Equity Conversion Mortgage (HECM)
For homeowners 62 or older, a HECM offers another way to access home equity without additional monthly mortgage payments. Instead of paying the lender, eligible homeowners may receive loan proceeds disbursed as a lump sum, monthly payout, a line of credit, or a combination of these options.
The borrower must meet all loan obligations, including living in the property as the principal residence and paying 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 loan balance grows over time and becomes due when you move, sell the home, pass away, or fail to comply with the loan terms. A reverse mortgage may help you stay in your home while turning built-up equity into a source of funds for retirement or other goals.
To stay in your home, you must live in it as your principal residence, maintain the home, and pay all taxes, fees, and homeowners’ insurance. To be eligible for a HECM, at minimum, borrowers must be 62 years of age or older and meet financial and property requirements, including attending HUD-approved counseling.
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.
To learn more, visit the CFPB’s Reverse Mortgage Discussion Guide.
Key considerations before you borrow
All home equity products have costs, responsibilities, and risks. You’ll likely need to pay closing costs, appraisal fees, reverse mortgage counseling fee, if applicable, loan origination charges, and other charges. Some fees are paid out of pocket, while others are often rolled into the loan balance, which increases the overall loan amount.
Also, because your home secures the loan, it’s essential to stay current on property taxes, insurance, and required maintenance. So, while borrowing against your home equity could offer significant advantages, it’s important to ensure the decision supports your long-term financial health.
–>Is a reverse mortgage a good idea? Here’s what you need to know.
Ready to reach for your financial goals?
This new year, consider giving yourself the gift of financial confidence. When your finances are in order, it may support peace of mind for you and your loved ones.
Whether you use your home equity to simplify your finances, support loved ones, or prepare for the future, you’re not just improving your bottom line—you’re creating lasting comfort.
Learn how much home equity you could access with a reverse mortgage.
Disclosures
These materials were not provided by HUD or FHA and were not approved by FHA or any government agency. A reverse mortgage is a loan that must be repaid. When the loan is due and payable, some or all of the equity in the property no longer belongs to the borrowers, who may need to sell the home or repay the loan with interest. The borrower must meet all loan obligations, including living in the property as their principal residence, and paying property charges such as taxes, fees, hazard insurance, and ongoing home maintenance. Failure to meet these obligations may result in default and foreclosure. Not tax advice. Consult a tax professional. For licensing information, visit www.nmlsconsumeraccess.org.
