If you're 62 or older and own your home, you've probably heard three different answers to the same question: how do I tap my equity without selling? A friend swears by a HELOC, your financial planner mentions a reverse mortgage, and your bank keeps mailing cash-out refinance offers. All three can work. They just work very differently, and the wrong choice can cost you flexibility later. Here's how I walk homeowners through the decision.
Start with one question: do you want a monthly payment?
This sorts out most of the decision. A cash-out refinance and a HELOC both come with a monthly payment, and you qualify for them on your income and credit. A reverse mortgage (the FHA-insured HECM) doesn't require a monthly mortgage payment. Instead, interest is added to the loan balance over time. You still keep paying property taxes, homeowner's insurance and upkeep on the home, and you keep the title.
If a monthly payment fits comfortably in your retirement budget, the first two options are usually cheaper. If freeing up monthly cash flow is the whole point, a HECM deserves a look.
How each option works
Cash-out refinance. You replace your current mortgage with a new, larger one and take the difference in cash. You get one loan, one payment and a new rate and term on the whole balance. On a conventional loan for a one-unit primary residence, Fannie Mae generally caps the new loan at 80% of the home's value. It works best when you'd want to refinance anyway. If your current rate is lower than what's available today, remember you'd be giving that up on the entire balance, not just the cash you take out.
HELOC (home equity line of credit). A HELOC is a second loan that leaves your first mortgage alone. You can usually draw on it for a set period, often around 10 years, and then repay over 10 to 20 years, when payments can rise significantly. Most HELOCs have variable rates, so payments can change. The CFPB also notes that a lender can freeze or reduce your line if your home's value drops or your finances change. A HELOC tends to fit a short-term, known expense you plan to pay back.
Reverse mortgage (HECM). You must be 62 or older and live in the home as your primary residence. You can take the money as a line of credit, monthly payments, a combination of the two, or a lump sum, with limits on how much you can access in the first year. A useful feature: the unused portion of a HECM line of credit grows over time. For FHA case numbers assigned on or after January 1, 2026, HUD's maximum claim amount is $1,249,125, which matters in coastal Orange County, where many homes are worth more than that. Before you can apply, federal law requires a counseling session with a HUD-approved counselor.
What happens for your spouse and heirs
With a cash-out refinance or a HELOC, the debt stays with the estate. Your heirs pay it off, refinance it or sell the home.
A HECM comes due when the last borrower or eligible non-borrowing spouse sells, moves out or passes away. Most families sell the home to repay it. The key protection: neither you nor your heirs will owe more than the home is worth, and if heirs want to keep the house, the CFPB says they won't have to pay more than 95% of its appraised value. If you're married or living with a partner, the CFPB generally recommends applying as co-borrowers so that person is protected. Talk with your family early.
A quick way to compare
Short-term need, comfortable with a payment: a HELOC is often the lowest-cost route.
Want one fixed payment and need to refinance anyway: a cash-out refinance can make sense.
Want to reduce or eliminate a monthly mortgage payment and plan to stay for years: a HECM is worth a serious look.
Not sure you'll stay in the home: be cautious with a reverse mortgage. The CFPB calls it an expensive way to cover short-term cash needs because of its upfront costs.
If you want more background on the reverse mortgage side, my earlier post explains how a HECM works for coastal Orange County homeowners.
For agents
You likely have clients 62+ who feel "house rich, cash poor," or who'd like to downsize but don't want a new mortgage payment. Two things to know. First, the HECM for Purchase option lets a buyer 62 or older buy a new primary residence with a sizable down payment and no required monthly mortgage payment afterward, which can open up the move-down market. Second, bring me in before a client lists or makes an offer. A short conversation about all three options can change whether they sell, stay or buy.
Your next step
There's no one right answer here, only the one that fits your goals, your timeline and your family. I'll lay out all three side by side for your situation, with no pressure. Request a no-pressure reverse mortgage review here, or if a HELOC or cash-out refinance looks like the better fit, request a refinance review. You can also call or text (949) 910-3943. I'm licensed in California, Arizona, Washington and Oregon.
Mack Davidson, NMLS #1006831, E Mortgage Capital. Your rate and terms depend on credit, property and loan program. Equal Housing Lender.
