Home equity for homeowners 62+
Tapping Home Equity in Retirement
HELOC, cash-out refinance or reverse mortgage? Here's how they really compare, in plain English.
Short answer: if you want to keep a low-rate first mortgage and can handle a new payment, a HELOC or closed-end second is often the first thing to look at. If you'd rather have one new loan, a cash-out refinance may fit. If your income doesn't fit standard underwriting, or you want no required monthly mortgage payment, a HECM reverse mortgage is worth understanding. I'm Jason Gray, NMLS 118354, with NEXA Lending, and I've been in mortgage lending since 1993.
By Jason Scott Gray, NMLS 118354 · Published October 20, 2026 · Last updated October 20, 2026
Why this question comes up so often
A lot of retirees are house-rich and cash-flow tight. Homeowners 62 and older held over $14.5 trillion in housing wealth at the end of 2025, according to the National Reverse Mortgage Lenders Association (NRMLA). Across all U.S. homeowners, equity was about $34.9 trillion in the first quarter of 2026, per the Federal Reserve.
Having equity and being able to borrow against it are two different things. In 2024 Home Mortgage Disclosure Act (HMDA) data, debt-to-income was the leading reason mortgage applications were denied, roughly 30 to 35 percent of denials. That hits retirees hard, because fixed income can look small on paper even when the home is paid down.
And many people give up a great rate to get cash. ICE reported that cash-out loans were 59 percent of refinances in Q2 2025, and about 70 percent of those borrowers took a higher rate, on average 1.45 percentage points higher, to pull out about $94,000.
Side-by-side comparison
| HELOC or closed-end second | Cash-out refinance | Reverse mortgage (HECM) | |
|---|---|---|---|
| Monthly payment | Yes. A new payment on top of your first mortgage. HELOCs often start interest-only, then the payment rises. | Yes. One new first-mortgage payment, usually larger than your current one. | No required monthly principal and interest payment. Optional payments are allowed. |
| Your first-mortgage rate | Kept. Your existing first loan stays untouched. | Replaced at today's rate and terms. | Any existing mortgage is paid off by the HECM. |
| How income qualifies | Standard underwriting. Debt-to-income must fit with both payments counted. | Standard underwriting. Debt-to-income must fit with the new payment. | No debt-to-income ratio test in the usual sense. A financial assessment checks you can keep up with taxes, insurance and upkeep. |
| Age | Any adult borrower. | Any adult borrower. | At least one borrower 62 or older; must be your primary residence. |
| Main trade-offs | Variable rate on most HELOCs. Payment can change. Two loans to manage. | You may give up a lower rate on your whole balance just to access part of your equity. | Balance grows over time as interest and fees accrue, so equity shrinks. You still pay taxes, insurance and upkeep. HUD-approved counseling is required. Upfront costs include FHA mortgage insurance. |
Each option in plain English
HELOC or closed-end second. A second loan behind your current mortgage. A HELOC is a line of credit you draw from as needed; a closed-end second (home equity loan) is a lump sum with a fixed payment. Best when you have a low first-mortgage rate you want to keep and your income comfortably covers a new payment.
Cash-out refinance. You replace your current mortgage with a bigger one and take the difference in cash. It can make sense if your current rate is already similar to today's market, or if you want one simple loan. If your current rate is much lower, compare carefully, because the new rate applies to the whole balance.
Reverse mortgage (HECM). An FHA-insured loan for homeowners 62 and older. You can take a lump sum, monthly draws, a line of credit or a mix. There is no required monthly mortgage payment, so the balance grows. You keep title, live in the home, and keep paying taxes, insurance and maintenance. Before you apply you'll meet with a HUD-approved counselor, which I think is a good thing.
Who a reverse mortgage tends to help
The people I see benefit most are equity-rich retirees whose income doesn't fit standard underwriting. Maybe your pension and Social Security cover your life just fine, but a lender's debt-to-income math says no to a HELOC. Maybe you want to stop making a mortgage payment so your monthly budget breathes. Or maybe you want a line of credit set aside for later.
It isn't for everyone. If you plan to move in a few years, want to leave the home free and clear to heirs, or can easily handle a HELOC payment, another option may fit better. I'll tell you honestly which way I'd lean and why.
Home equity in retirement: common questions
Can I get a HELOC on retirement income?
Often, yes. Social Security, pensions, annuities and regular retirement account distributions can count as qualifying income when they are documented and expected to continue. Some lenders can also use asset-based calculations. The hurdle for many retirees is debt-to-income, because the new HELOC payment is added to your existing debts. I can check how your income would be counted before you apply.
Does a reverse mortgage have a monthly payment?
A HECM reverse mortgage does not require a monthly principal and interest payment. You can choose to make payments if you want to slow the growth of the balance. You must still pay property taxes, homeowners insurance, any HOA dues, and keep the home in good repair. Falling behind on those can put the loan in default.
Will I lose my home, or does the bank own it with a reverse mortgage?
No. You keep title and ownership of your home. The lender places a lien on it, just like a regular mortgage. The loan becomes due when the last borrower or eligible non-borrowing spouse moves out permanently, sells or passes away, or if property charges or upkeep are not kept up. Staying current on taxes, insurance and maintenance is what keeps you in good standing.
Can I keep my low-rate first mortgage?
With a HELOC or closed-end second, yes. Your first mortgage stays exactly as it is and the new loan sits behind it. A cash-out refinance replaces your first mortgage with a new one at today's rate. A HECM pays off any existing mortgage as part of the loan, so your old payment goes away, but so does the old loan.
What happens to my heirs with a reverse mortgage?
When the loan comes due, your heirs can sell the home and keep any equity left after the loan is repaid, keep the home by paying off the balance or refinancing it, or let the lender sell it. A HECM is non-recourse, so heirs generally do not owe more than the home is worth when it is sold. Talking with your family early helps.
Who is eligible for a HECM reverse mortgage?
At least one borrower must be 62 or older, the home must be your primary residence, and you need enough equity. You must complete counseling with a HUD-approved counselor before applying, and the lender reviews your ability to keep up with taxes, insurance and upkeep. Some borrowers need a set-aside for those costs.
Is a HELOC, cash-out refinance or reverse mortgage best for me?
It depends on how much you need, how long you plan to stay, your current first-mortgage rate, your income and whether you want a monthly payment. There is no single right answer. I'll lay the options out side by side with your actual numbers so you can decide with your family and advisors.
Are there closing costs?
Yes, each option can have costs. They vary by lender, loan size and program, and HECMs include FHA mortgage insurance. I'll show you the costs in writing up front so nothing is a surprise.
Let's look at your numbers together
No pressure. No obligation. Just honest answers and a plan. Call or text me and we'll compare all three options using your real situation. Bring your family or financial advisor into the conversation if you'd like.
Jason Scott Gray, Branch Manager | Mortgage Consultant, NMLS 118354 · NEXA Lending, NMLS 1660690. 1524 Market Street, Suite 103, Kirkland, WA 98033 · jsgray@nexalending.com
Sources: NRMLA (housing wealth of homeowners 62+, end of 2025); Federal Reserve (U.S. homeowner equity, Q1 2026); 2024 HMDA data (mortgage denial reasons); ICE Mortgage Monitor (Q2 2025 cash-out refinance data). Educational information only, not financial, tax or legal advice. This is not a commitment to lend or an offer of credit. All loans are subject to credit approval, underwriting guidelines and property eligibility. HUD-approved counseling is required for reverse mortgages. A reverse mortgage borrower must live in the home as a primary residence and continue to pay property taxes, homeowners insurance and maintenance; failure to do so can cause the loan to become due. The loan balance grows over time. These materials are not from, or approved by, HUD or FHA. Equal Housing Opportunity.