Finding ways to bring in more cash in retirement isn’t easy. Many expenses, including insurance and medical care, are largely out of your control.

There is one area, though, where many retirees have a big advantage over their younger peers: access to a big, golden nest egg in the form of their home.

After so many years of appreciation, older homeowners are sitting on historic home equity amounts. The median home equity for homeowners age 65 and older is about $250,000, according to the Joint Center for Housing Studies of Harvard University. Overall, Americans 62 and older held $14.62 trillion in home equity at the end of last year — more than 40% of the country’s total home equity — according to data from the National Reverse Mortgage Lenders Association.

Whether you’re looking to supplement your monthly retirement income or just fund a one-off project, there are many ways your home can boost your cash flow. Let’s compare the different approaches.

Selling your home

Pros

• Increases your retirement nest egg
• Reduces or eliminates mortgage payments, insurance premiums and property taxes
• Eliminates maintenance and repair responsibilities if you choose

Cons

• Moving can be a hassle
• Closing costs, including real estate commissions, can reduce earnings
• May owe capital gains tax on profits

Older adults are roughly split in opinion about selling their homes. Half are open to the idea of selling or have already done it, while the other half are vehemently opposed to the idea, according to a Fannie Mae survey.

It’s easy to see why many people prefer to age in place. You’ve spent years paying down your mortgage, building community connections and making memories.

But maintaining a home — especially one with more space than you regularly use — becomes more difficult as you age, particularly if you aren’t able to hire professionals who can help.

You’re not just slowing down physically, says Mark Van Drunen, senior managing director with MAI Capital Management, pointing out that aging-related cognitive decline is common. “It’s hard for you to make those executive decisions, and then it becomes your children’s problem. They then have to take over and make those decisions.”

In light of these challenges, selling your home offers certain advantages. You can choose a new home that’s easier and less expensive to maintain, safer to live in, closer to family or in an area with a more comfortable climate or amenities. These factors can make it easier to live independently in your new home for longer than you would otherwise.

Then there’s the (obvious) financial piece: Selling your home and buying a more affordable one outright or becoming a renter can easily add six figures to your retirement portfolio.

Even if you’re resistant to the idea, it’s smart to do the math so you can weigh how this option compares to other home equity strategies. You’ll want to estimate the amount you’ll make from selling your house after all the closing costs, taxes and remaining home debt balances are paid off. Ideally, you’ll net a big enough profit to land safely in your next phase and shore up your retirement savings, which may be easier if you downsize into a smaller home or move to an area with a lower cost of living.

Cash-out refinance

Pros

• Access to a lump sum
• Takes advantage of appreciation in your home's value
• Can possibly give you a lower APR

Cons

• Adds 15 to 30 years to your mortgage obligation
• Monthly payment might increase
• Closing costs can reduce payout

While it’s not always ideal, the reality is that about half of homeowners today enter retirement carrying a mortgage. If that’s you, there are still ways to generate some extra cash if you’ve built up a decent amount of equity — even if you’re set on staying put.

A cash-out refinance allows creditworthy homeowners with sufficient equity and income to replace their primary mortgage with a new, larger one. You’ll pay off your first mortgage and take the extra funds as a lump sum. Unlike a home equity loan or HELOC, which adds a separate debt, a cash-out refinance rolls everything into one loan.

Choosing whether a cash-out refi or a home equity loan is better often comes down to the best deal. “It would depend on your rates,” says Kevin Lam, a certified financial planner and retirement specialist with Age Wisely Financial. “So that becomes kind of a mathematical question.”

You can use free calculators online to see how much you’d owe under each option. Compare the monthly payment, fees and total interest for each option. If you can refinance your whole mortgage from a higher rate to a lower rate, for example, the cash-out option may be cheaper overall. Remember, too, that you’ll need to consider your ability to pay the new mortgage for the next 15 to 30 years — perhaps an even bigger factor for many retirees.

You might also be able to free up some money month-to-month via a simple rate-and-term refinance. You wouldn’t get any cash back, but if you can qualify for a smaller monthly payment, it could free up cash in your budget. Today’s retirees, though, will likely have to wait for a while before rates drop low enough for the savings to be enough to outweigh the upfront costs.

Home equity loan or HELOC

Pros

• Flexible timing to access funds
• Potentially shorter payback period vs. refinancing
• Only pay interest on what you borrow from a HELOC

Cons

• Closing costs, even if you don't use all the money
• Possibly larger monthly payment if a variable APR resets higher
• Failure to keep up with payments could lead to foreclosure

If you don’t want to take out a brand-new mortgage, a better option may be taking out a home equity loan or home equity line of credit (HELOC) to help with retirement expenses.

Home equity loans provide you with a lump sum of cash and can come with term lengths as short as five years or less, something that may align better with many retirees’ timelines. A HELOC lets you borrow against your equity as needed, often over five to 10 years, which can help as expenses change. You only pay interest on what you tap, not the full credit line.

What’s more, home equity products are starting to evolve to better serve specific populations, including older homeowners. Some lenders, for example, offer fixed-rate HELOCs without a balloon payment at the end of the repayment period. That design is better for paying off higher-interest debt or simply planning a predictable payment each month — both of which retirees living on a fixed income may need to prioritize.

Even so, home equity loans and lines of credit don’t get around the fact that you’ll need to budget money for extra debt payments in retirement, even if they are modest. And traditional variable-rate HELOCs, in particular, can be tough to plan around as economic conditions change.

“The biggest problem with the HELOC is that the banks can pull your line of credit, so you’re not guaranteed that credit availability,” Lam says. Lenders can only do this in certain instances that will be outlined in your original agreement, such as if your home value drops and you no longer have enough equity in your home.

Reverse mortgage

Pros

• Can continue living in your home
• No monthly mortgage payments while you live in the home and meet loan obligations
• Flexibility in how you access funds

Cons

• Requirement to maintain home insurance coverage
• Property must be maintained and kept in good condition
• Less equity in the home to bequeath to your heirs

Thanks to a big overhaul of government regulations, today’s reverse mortgages are a far cry from the late-night infomercials of yesteryear, and they’re winning over some former skeptics.

“I did a lot of research and realized the power in reverse mortgages and how helpful they could be,” Lam says. “Frankly, one of the biggest issues is trying to get seniors — actually anybody — to really understand reverse mortgages as they are now.”

The most common type of reverse mortgage is called a Home Equity Conversion Mortgage or HECM. These federally-insured reverse mortgages are only available to homeowners after they reach age 62. They require no monthly payments and can be structured as a line of credit, a lump sum or — one of Lam’s favorite uses — as steady monthly payments that continue indefinitely as long as you meet the ongoing loan requirements. This includes living in your home full-time and keeping up with property taxes, homeowners insurance and — a big caveat for many retirees — maintenance.

“Somebody who’s in their 80s is not able to maintain it” on their own, Van Drunen says, so you’ll need to factor in maintenance costs, particularly if there are tasks you typically handled on your own when you were younger.

It’s also true that your reverse mortgage balance will continue to grow, possibly even beyond your home’s actual value, but that’s not as scary as it first sounds. Since reverse mortgages are “non-recourse” loans, you won’t have to pay back a balance that’s more than what your home is worth. Instead, if you or your heirs end up selling your home and you owe more than it’s worth, the remaining amount will be forgiven.

Renting out your home

Pros

• No loan origination costs or fees
• Doesn't decrease your home equity
• No monthly payments to make

Cons

• Listing fees to fill room
• Eviction process can be lengthy and expensive if a tenant stops paying
• Can complicate your tax situation

The truth is that most homeowners — more than 8 in 10, according to one measure — don’t want to use their home equity in retirement. Luckily, there are other ways your home can provide income if you’re willing to deal with different tradeoffs.

One area that seems to be growing more popular is renting your home for extra income. In fact, people over 65 are the fastest growing age group in the roommate market, according to roommate website Spareroom. Although older adults still comprise a very small share of Americans living with roommates, the percentage of roommates who are 65 and up more than tripled over the past decade.

On the downside, of course, you’ll have to adjust with living with someone else: ”When you get up into your 60s, people are kind of set in their ways. Sometimes it’s not that easy to share your living space with somebody.”

Renting out your home for extra income can take many forms, though. Instead of a full-time roommate, you could list your children’s old bedrooms on Airbnb, for example, or divide up your home into a duplex or additional dwelling unit (ADU) and rent it out long-term. Many older adults are also turning to home-sharing agreements with like-minded compadres, a la the Golden Girls. Such arrangements can help provide social interaction and safety at a time when many older adults report increased loneliness, too.

How to choose the right home equity strategy for your retirement

Each option outlined above has its own costs and tradeoffs; which is best for you will depend on your preferences and financial circumstances. Before you borrow, carefully consider how important it is to remain in your home, whether you can handle monthly payments after you leave full-time work and whether preserving equity for the future matters to you.

Here’s how to think through the options:

• Are you in a high cost-of-living area or struggling to maintain a bigger house than you need? Consider selling and renting or purchasing a smaller, more affordable property.
• Do you need a lump sum for a specific use (like aging in place renovations), and are you able to handle monthly payments? Look into a cash-out refinance or home equity loan.
• Want flexible access to funds or a backup credit line for unexpected expenses? A HELOC lets you tap your equity as you need it over a period of time.
• Do you need more cash flow without a monthly payment? Reverse mortgages can provide funding without a new monthly bill.
• Have extra space? Renting out part of your home allows you to generate some income while aging in place.

Editor’s note: This story was originally published in January 2025. We’ve updated it to feature current information and statistics.

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