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5 Ways Homeowners Use Their Equity Without Selling Their Home
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Key points
Home equity is the difference between what you owe on your home and what it’s worth. Understanding the options for accessing that equity without selling may provide greater financial flexibility, especially for older homeowners.
Options like a HELOC, home equity loan, reverse mortgage, second reverse mortgage, cash-out refinance, and home equity agreement all have different advantages and considerations.
Reverse mortgages do not require monthly mortgage payments, but borrowers must live in the home as their primary residence, maintain the home, and continue to pay property taxes, fees, and insurance costs.
Quick Answer: Options that may allow homeowners to access equity without selling include a HELOC, a home equity loan, a reverse mortgage, a second reverse mortgage, a cash-out refinance, and a home equity agreement.
For homeowners looking to access home equity, selling isn’t always the best option. Maybe you’re locked in at historically low interest rates and don’t want to trade that for today’s rates. Or maybe you just aren’t ready to walk away from the home and community you’ve lived in for years.
For many older homeowners, their home equity is one of their largest financial assets—so what do you do when you need funds, but you’re not willing to sell your home?
Fortunately, there are several options that may allow you to tap your equity while staying put. Options like home equity lines of credit (HELOCs), home equity loans, reverse mortgages, cash-out refinances, and newer options like home equity agreements each offer different ways to turn your home equity into usable funds.
The key is understanding how each option works—and which one best aligns with your financial situation, long-term plans, and comfort level.
How home equity is calculated
Home equity is the difference between your home’s current market value and the amount you still owe to your mortgage lender. Essentially, it’s the part of your home that you truly own.
The basic formula looks like this:
Current Home Value − Remaining Mortgage Balance = Home Equity
For example, if your home is worth $500,000 and you owe $200,000 on your mortgage, you have $300,000 in equity.
Your equity can grow in two main ways:
- Pay down your mortgage balance—either through regular monthly payments or extra payments.
- Wait for your home price to appreciate due to market conditions or improvements you make to the home.
Lenders typically require you to retain a portion of equity in your home after borrowing—often at least 15–20%, depending on the product and your financial profile. This requirement is expressed through your loan-to-value ratio (LTV), which measures how much you’re borrowing compared to your home’s value. Most lenders cap total borrowing at 80–85% of your home’s value, meaning you must keep the remaining 15–20% as equity.
Now that you understand how home equity is calculated, the next question becomes: how do you use it? Homeowners have several options to turn that equity into usable funds—let’s look at them in more detail.
1. Home equity line of credit (HELOC)
A home equity line of credit (HELOC) is a revolving line of credit that allows homeowners to borrow against their available equity as needed. Instead of receiving a lump sum upfront, you can draw funds over time during a set draw period, which is typically followed by a repayment period.
HELOCs often have variable interest rates, meaning your monthly payments can change over time. During the draw period, some lenders may allow interest-only payments, but once the repayment period begins, you’ll be required to pay both principal and interest.
To be eligible for a HELOC, borrowers typically need good credit, a history of on-time monthly mortgage payments, and sufficient equity in their home. Lenders will also evaluate income, debt levels, and overall financial stability.
Pros of a HELOC:
- Flexibility to borrow only what you need, when you need it
- Lower initial payments during the draw period (in some cases)
- Interest may be lower than that of credit cards or personal loans
Cons of a HELOC:
- Variable interest rates can lead to unpredictable monthly costs
- Payments may increase significantly during the repayment period
- Your home is used as collateral, putting it at risk if you’re unable to repay
A HELOC may be a good fit for homeowners with predictable income who want ongoing access to funds for expenses that recur over time, such as home renovations.
–> What is the difference between a HELOC and a HECM reverse mortgage? Learn more: HELOC vs. HECM: Which is right for you?
2. Home equity loan
A home equity loan1 allows homeowners to borrow a lump sum against their available equity, which is then repaid over time through fixed monthly payments. Unlike a HELOC, which provides ongoing access to funds, a home equity loan delivers the full amount upfront.
These loans typically come with a fixed interest rate, meaning your monthly payment remains consistent throughout the life of the loan. This predictability can make budgeting easier, especially for borrowers on a fixed income.
To be eligible, borrowers generally need good credit, reliable income, a history of on-time mortgage payments, and sufficient equity in their home. Lenders will also evaluate your debt-to-income (DTI) ratio to ensure you’re able to repay the loan.
Pros of a home equity loan:
- Fixed interest rate and predictable monthly payments
- Lump sum funding is useful for large, one-time expenses
- May offer lower interest rates than unsecured debt options
Cons of a home equity loan:
- Less flexibility than a HELOC since funds are received all at once
- Monthly payments begin immediately and include both principal and interest
- Your home is used as collateral, which may put it at risk if you’re unable to repay
A home equity loan may be a good option for homeowners who have a specific expense in mind—such as a major renovation or getting a handle on debt—and prefer the stability of predictable payments over time.
3. Reverse mortgage
A reverse mortgage is a loan for older homeowners, typically 62+, that may allow them to convert a portion of their home equity into cash without making monthly mortgage payments. Instead of paying the lender each month, funds are disbursed to the borrower, and the loan balance increases over time as interest and fees are added.
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.
Funds from a reverse mortgage may be received in several ways, including a lump sum, monthly payments, or a line of credit. The loan is typically repaid when the homeowner sells the home, permanently moves out, passes away, or otherwise fails to meet the terms of the loan.
To be eligible, borrowers must meet age requirements, live in the home as their primary residence, have a decent amount of home equity, and maintain the property. To keep the loan in good standing, borrowers must also stay current on property taxes, homeowners insurance, and any applicable homeowners association (HOA) fees.
Pros of a reverse mortgage:
- No required monthly mortgage payments
- Multiple payout options to fit different financial needs
- May provide added financial flexibility during retirement
Cons of a reverse mortgage:
- Loan balance grows over time, reducing remaining home equity
- Fees and closing costs may be higher than those of other loan types
- Borrowers must continue paying property taxes, insurance, and upkeep
- May impact the amount of equity left to heirs
A reverse mortgage may be a good fit for older homeowners who want to access equity without taking on a monthly mortgage payment and while continuing to live in their home.
Note: Most reverse mortgages are home equity conversion mortgages (HECM). These types of reverse mortgages are overseen by the U.S. Department of Housing and Urban Development (HUD). Borrowers must participate in a HUD-approved counseling session before obtaining a HECM 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, 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.
4. Second reverse mortgage
A second reverse mortgage allows eligible homeowners to access home equity while keeping their existing primary mortgage, including a low interest rate they may not want to replace. Borrowers must still make payments and meet existing obligations under the first lien mortgage.
Instead of refinancing that first mortgage, this adds a second loan that does not require monthly mortgage payments.
Like a traditional reverse mortgage, borrowers must meet age requirements, live in the home as their primary residence, and stay current on property taxes, insurance, and maintenance. The loan balance grows over time and is generally repaid when the home is sold, the borrower moves out or passes away, or the homeowner does not otherwise meet the loan obligations.
Unlike a standard reverse mortgage, the age requirement for a second reverse mortgage may be as low as 55. Also, borrowers do not have to pay off their forward mortgage with the proceeds.
Pros of a second reverse mortgage:
- Access equity without refinancing your first mortgage
- No required monthly mortgage payments on the second loan
- Allows homeowners to keep a potentially low existing interest rate
- May provide flexibility for retirement income or large expenses
Cons of a second reverse mortgage:
- Loan balance increases over time, reducing overall home equity
- Availability and eligibility requirements may be more limited than other options
- Borrowers must continue paying property taxes, insurance, and maintaining the home
- May reduce the amount of equity available to heirs
A second reverse mortgage may be a good option for older homeowners who want to tap into their equity while preserving the terms of their current mortgage—especially if they don’t want to give up a great interest rate.
–>Learn more about HomeSafe Second, a second reverse mortgage option from Finance of America.
The borrower must meet all loan obligations, including meeting those under the first lien mortgage, 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.
5. Cash-out refinance
A cash-out refinance1 replaces your existing mortgage with a new, larger loan, allowing you to take the difference in cash. This option enables homeowners to access their equity while resetting the terms of their mortgage.
With a cash-out refinance, you’ll receive a lump sum at closing and begin making monthly payments on the new mortgage loan, which includes both principal and interest. Because you’re replacing your original mortgage, your new interest rate and loan terms may be different—potentially higher, depending on current market conditions.
Lenders typically require strong credit, stable income, and sufficient equity to be eligible. The amount you may be able to borrow will depend on your home’s value, your remaining mortgage balance, and lender guidelines.
Pros of a cash-out refinance:
- Access a large amount of cash in a single transaction
- May offer lower interest rates than other types of debt
- Simplifies finances by combining your mortgage and borrowed funds into one loan
Cons of a cash-out refinance:
- Replaces your existing mortgage, which could mean losing a low interest rate
- Monthly payments may increase depending on loan terms and rates
- Closing costs may be high, similar to a traditional mortgage refinance
- Your home remains collateral, which may put it at risk if you’re unable to repay
A cash-out refinance may be a good fit for homeowners who want to access a substantial amount of equity and are comfortable replacing their current mortgage—particularly if current interest rates align with their financial goals.
6. Home equity agreement
A home equity agreement (HEA), sometimes called a home equity investment, allows homeowners to access cash by selling a portion of their home’s future value to an investment company. In exchange for an upfront payment, the homeowner agrees to share a percentage of their home’s appreciation when the agreement ends.
HEAs typically do not require monthly payments or charge interest. The homeowner stays in the home, keeps the title, and continues to handle property taxes, insurance, and maintenance. The agreement is usually settled when the home is sold, refinanced, or at the end of a set term.
While still a relatively new option, HEAs have gained traction in recent years as more homeowners look for flexible ways to access equity without taking on monthly payments. The market remains small—estimated roughly $2 to $3 billion according to the Consumer Financial Protection Bureau (CFPB)—but is expanding, with over $1 billion in securitized home equity agreements issued over a 10-month period.
However, it’s worth noting that CFPB reports some homeowners feel frustrated or misled by these products—so make sure you understand the contract.
Pros of an HEA:
- No monthly payments required
- May be an option for homeowners who are not eligible for traditional loans
- Provides access to equity without increasing monthly debt obligations
Cons of an HEA:
- You give up a share of your home’s future appreciation
- The total cost can be higher than interest-based options if home values rise significantly
- Repayment amounts can be difficult to predict—and often must be paid in a lump sum
- May limit future refinancing or borrowing options
- Newer option, so it may be harder to understand or offer fewer consumer protections
An HEA may appeal to homeowners seeking flexibility and minimal monthly obligations. However, it’s important to understand the tradeoff: while you’re not selling your home, you are giving up a portion of its future value—which could become costly over time as your property appreciates.
Comparing your home equity options at a glance
Each home equity option offers a different balance of flexibility, cost, and long-term impact. Some prioritize predictable payments, while others reduce monthly obligations but may increase costs over time.
The right choice depends on how you plan to use the funds, your current financial situation, and how long you expect to stay in your home.
| Option | Payment structure | Requirements | Rates/costs | Best for |
| HELOC | Variable; interest-only draw, then repayment | Good credit, income, equity | Variable rate; may increase | Ongoing expenses |
| Home equity loan | Fixed payments (principal + interest) | Good credit, stable income, equity | Fixed rate; predictable | Large one-time costs |
| Reverse mortgage | No monthly mortgage payments* | Age 62+, primary home, cover taxes/insurance/maintenance | Interest accrues; higher upfront fees | Retirement flexibility |
| Second reverse mortgage | No monthly payments on second loan** | Age 55+ (most states)***, existing mortgage, equity | Interest accrues; costs vary | Access more equity |
| Cash-out refinance | New mortgage payment | Good credit, stable income, equity | New rate; closing costs | Large lump sum |
| Home equity agreement | Pay at end of agreement, or when the home is sold | Good equity | Varies by agreement | Large lump sum |
* 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 borrower must meet all loan obligations, including meeting those under the first lien mortgage, 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.
*** Minimum age for Finance of America’s HomeSafe Second is 60 in Massachusetts, New York, Washington, and 62 in North Carolina and Texas.
What are the risks of using home equity?
Before tapping into your home equity, it’s important to understand the potential tradeoffs. While these options may provide valuable financial flexibility, they also carry long-term implications that could affect your financial future.
Costs and fees
Accessing your home equity isn’t free. Depending on the option you choose, you may encounter closing costs, origination fees, servicing fees, appraisal costs, or additional insurance requirements. Some products also include ongoing costs, such as interest charges or a share of your home’s future value.
Understanding the full cost—not just the upfront terms—can help you make a more informed decision.
Your home can be at risk
Home equity loan options use your home as collateral. That means if you’re unable to meet the terms of the agreement, such as making required payments or maintaining the property, you could risk foreclosure.
Even for options without monthly payments, like reverse mortgages or HEAs, borrowers must still meet ongoing obligations like property taxes, insurance, and home maintenance.
–>Considering a reverse mortgage? Learn more: Reverse mortgage foreclosure: How it happens and what to do next.
Eligibility requirements vary
Each option we’ve discussed has different eligibility criteria. Some require strong credit, steady income, and low debt levels, while others may have age requirements or alternative underwriting standards. Reverse mortgages, for example, have an age minimum, in addition to other eligibility requirements, while HELOCs and home equity loans consider your credit score.
Understanding what you may be eligible for can help narrow your options down.
Accessing home equity could impact your future options
Using your home equity today may affect your ability to borrow against it in the future. Increasing your loan balance or sharing future appreciation could limit refinancing options or reduce the amount of equity available later.
It is worth considering how your decision fits into your long-term financial plans—especially if you expect to move, refinance, or want to leave your home to heirs.
Final thoughts
Your home may be one of your most valuable financial assets—but accessing that wealth doesn’t have to mean giving it up. Today, homeowners have more options than ever to turn home equity into usable funds.
Each option comes with its own advantages, costs, and long-term considerations. Some options prioritize flexibility; others offer predictable payments, and some reduce monthly obligations altogether. The right choice depends on your financial goals, your timeline, and how you plan to use the funds.
For homeowners who want to preserve a low existing mortgage rate while still accessing additional equity, options like a second reverse mortgage offer a way to do both—providing added flexibility without requiring monthly mortgage payments on the new loan.
Learn more about Finance of America’s HomeSafe Second reverse mortgage option.
The borrower must meet all loan obligations, including meeting those under the first lien mortgage, 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.
Frequently asked questions about using home equity
Is it a good idea to take equity out of your house?
It depends on your personal situation and needs. Using home equity can be a smart way to access lower-cost funds compared to credit cards or personal loans, especially for home improvements or getting a handle on debt. However, because your home is used as collateral, it is important to have a repayment plan and understand the long-term impact on your equity.
What is the cheapest way to get equity out of your house?
The “cheapest” option will vary based on interest rates, fees, and how long you keep the loan. Home equity loans and HELOCs often offer lower interest rates than unsecured debt, while options like home equity agreements or reverse mortgages may not have monthly mortgage payments but could cost more over time if your home value increases. Comparing total costs—not just monthly payments—may help determine the most cost-effective solution for you.
The borrower must meet all loan obligations, including meeting those under the first lien mortgage, 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.
Can you use home equity without refinancing?
Yes. Options like HELOCs, home equity loans, reverse mortgages, second reverse mortgages, and HEAs allow you to access equity without replacing your existing mortgage. This may be especially important for homeowners who want to keep their current loan at a low interest rate.
What are the drawbacks of a cash-out refinance?
A cash-out refinance replaces your existing mortgage, which could mean taking on a higher interest rate than you currently have. It also comes with closing costs and resets your loan term, which may increase the total interest paid over time.
What is a second reverse mortgage?
A second reverse mortgage is a loan that may allow eligible homeowners to access additional equity without refinancing their existing mortgage. It is a second lien that does not require monthly mortgage payments, though borrowers must continue to meet obligations like property taxes, insurance, and home maintenance.
The borrower must meet all loan obligations, including meeting all loan obligations under the first lien mortgage, 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.
How much equity can I borrow?
The amount you may be able to borrow depends on several factors, including your home’s value, your remaining mortgage balance, your age (for reverse mortgage products), your credit profile, and lender guidelines. Many lenders require you to maintain a certain level of equity—often at least 15% to 20%—after borrowing.
Can I use home equity for any purpose?
In most cases, yes, home equity proceeds are generally flexible. Homeowners commonly use equity for home renovations, paying off higher-interest debt, covering education expenses, or increasing financial flexibility in retirement. However, because your home is used as collateral, most experts recommend using the funds for meaningful or strategic expenses rather than discretionary spending.
1 Finance of America does not currently offer home equity loans or cash-out refinance loans.
About the author
Danielle Antosz
Danielle Antosz is the Web Content Manager at Finance of America and a journalist with more than 10 years of experience whose work has appeared in MoneyWise, MSN, Yahoo! Finance, and The Motley Fool. She specializes in making complex financial topics accessible and is passionate about advancing financial literacy.
Disclaimer
This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For tax advice, please consult a tax professional. For more information about whether a reverse mortgage fits into your retirement strategy, you should consult your financial advisor.
