Home Equity Options Widen as Retirees Hold $15 Trillion in Value

Homeowners 62 and older hold nearly $15 trillion in home equity — nearly double early-2020 levels — while home equity loan and HELOC rates average about 8 percent versus nearly 20 percent for credit cards.

"Using home equity is a puzzle," said Ashley Morgan, a debt attorney in Chantilly, Virginia. "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."

The options range from traditional HELOCs and home equity loans to federally insured reverse mortgages and newer home equity investments (HEIs), where homeowners sell a percentage of future appreciation for upfront cash. A 2026 Citizens Bank survey found 44 percent of homeowners said renovating their current property was their most realistic housing option, versus just 13 percent who said buying another home felt achievable.

The choice carries significant financial consequences. A homeowner receiving $50,000 through an HEI — equal to 10 percent of a $500,000 home — would owe $110,000 after 10 years at 1.5 percent annual appreciation, or $187,000 at 5.5 percent, according to estimates from Point, an online HEI provider. By comparison, a 10-year home equity loan for the same amount at 8 percent would cost about $73,000 to repay, based on a Bankrate survey of lenders in June 2026.

A HELOC provides a borrowing limit based on property value, allowing homeowners to draw when needed and pay interest only on the amount borrowed. "A HELOC gives you the ability to prepare for future expenses or cover projects that happen in multiple stages," said Fabien Thierry, head of home equity lending at Citizens Bank. However, HELOCs typically carry adjustable rates, so monthly payments can change.

A home equity loan delivers a lump sum with a fixed rate and set repayment schedule, making it suitable for a specific expense such as a major renovation or accessibility upgrade. Interest accrues on the full amount immediately, and some loans charge prepayment penalties. Both products use the house as collateral — missing payments can trigger foreclosure.

HEIs Can Cost Three Times More Than a Traditional Loan

Home equity investments have grown more popular as homeowners seek cash without adding a monthly bill. The cost is deferred and tied to the home's future value, which can make these deals feel far less expensive than they are. "The seller may not realize how much upside they are giving away," said Luca Rassenti, a financial adviser in Tucson, Arizona.

Reverse mortgages, available through federally insured Home Equity Conversion Mortgages starting at age 62, allow homeowners to receive funds as a lump sum, installments, or a line of credit without monthly loan payments. Interest and fees accrue to the balance, which becomes due when the property is sold, the owner moves out permanently, or passes away. Heirs will not owe more than the property's value if the loan balance exceeds it. Borrowers must continue paying property taxes and insurance and maintain the home, or face foreclosure.

Selling Remains the Simplest Route, But Costs Add Up

Selling unlocks all home equity directly, and downsizing can free up cash while reducing future housing costs. But transaction costs typically run up to 10 percent of the property value for selling and 5 percent for buying another home, according to Zillow. Single homeowners can exclude up to $250,000 of profit from capital gains taxes on a primary residence sale, or $500,000 for married couples filing jointly, provided they lived in the home for two of the last five years. "If you've owned a house for many years, you could have a substantial taxable gain," Morgan said.

Untapped equity can also serve as a reserve for future needs. About 80 percent of 65-year-olds will require long-term care at some point, according to the Center for Retirement Research, with costs exceeding $100,000 per year. Before tapping equity for a less urgent expense, homeowners should consider whether other savings could cover it and preserve that buffer.

When a homeowner passes away, real estate receives a step-up in basis to its market value at that time, meaning heirs could sell without owing taxes on appreciation during the owner's lifetime. Rassenti suggests asking heirs whether they would provide a loan or gift today, with the expectation they will inherit the property later. "Talk to the kids about what matters to them," Morgan said.

This article is for informational purposes only and does not constitute investment advice.