Best Home Equity Loans for Seniors: Options, Rates & How to Qualify

Longtime homeowners are sitting on a lot of home equity — and it can be tapped in retirement. Homeowners aged 62 and older held a record $14.62 trillion in home equity in the fourth quarter of 2025.[1]

If that's you, you may be wondering: What's the smartest way to use that equity on a fixed income? And can you even qualify without a regular paycheck?

Seniors have several options for tapping home equity — the most likely choice depends on your goals and financial situation.

Whether you're a homeowner or an adult caregiver researching for a parent, this guide covers the options for tapping home equity as a senior, how to qualify as a retiree, and what to consider before you apply.

Home equity options for seniors at a glance

Seniors have plenty of options for tapping home equity — but which is best? It comes down to two things: your goal, and whether you can qualify on credit and income.

Home equity loan options for seniors

If you're a senior or an adult child exploring options for a parent, consider these ways to use home equity to supplement retirement income, cover bills, fund home improvements, or handle other expenses.

Home equity loan

A home equity loan is a type of second mortgage that comes with its own rate and terms. It works by providing the homeowner with a one-time lump sum that must be repaid each month over a set term.

One of the biggest pros of a home equity loan is its fixed rate, which gives you a predictable monthly payment — a valuable feature for seniors on a fixed income.

Another pro? Because it's considered a second mortgage, a home equity loan leaves your primary mortgage untouched. But that feature can also be a drawback for some. Having two mortgages at once means making two monthly payments, and your home is collateral for both.

As of July 8, 2026, the average home equity loan rate in the U.S. is 8.08%, according to Bankrate data.[2]

There's no age requirement for a home equity loan, but you'll need sufficient income, a solid credit score, and enough equity to qualify. Lenders measure that equity with your combined loan-to-value ratio (CLTV) — your first mortgage plus the new loan, divided by your home's value — and typically cap it around 80–85%. On a $400,000 home at an 85% cap, that's up to $340,000 in total mortgage debt; if you still owe $150,000, you could borrow roughly $190,000.

There are a few things to keep in mind with this loan type, too. With your home as collateral, you risk foreclosure if you fall behind on payments. Also, the interest is only deductible if you use the loan funds to improve the home.[3] And once the homeowner passes away, the balance must be settled from the estate or by any heirs selling the home.

Home equity line of credit (HELOC)

A home equity line of credit, or HELOC, is a revolving credit line tied to your home. It works by allowing you to draw funds multiple times during a draw period. You pay interest only on what you borrow, then repay the balance at a variable rate after the draw period ends.

HELOCs are especially popular with homeowners aged 60 and older, who often use them for home improvements, according to the Federal Reserve Bank of New York.[4]

A HELOC's appeal is flexibility: you only pay interest on what you borrow, which works well if you'll need money in phases or aren't sure how much you'll need.

But one of the biggest downsides is that variable rate.

The national average rate on a HELOC is 7.43% as of July 8, 2026, according to Bankrate data.[5]

HELOC and home equity loan requirements are similar and involve meeting certain credit, income, and equity targets specified by lenders.

Since HELOCs carry a variable rate, some borrowers face payment shock if rates climb and push the monthly bill higher. Falling behind on payments can put you at risk of foreclosure, so keep some cushion in your budget to cover potential increases.

Cash-out refinance

With a cash-out refinance, you can tap your home equity by getting a new, larger mortgage that replaces your existing one and delivers the difference to you in cash. The upside to this option is that you only have one mortgage to repay. And depending on your current equity, you could potentially get a large sum.

But for anyone holding a low rate from the pandemic era, beware — you'll have to forfeit that rate to do a cash-out refinance. In that case, this option might not be worth it unless your current rate is already near or above the market rate.

To do a cash-out refinance, you'll go through the full mortgage underwriting process. That means meeting a lender's requirements for credit score and debt-to-income (DTI) ratio and completing a home appraisal.

Keep in mind that a cash-out refinance resets the clock on your loan term. If you're close to paying off your current mortgage, this option might not make sense. You'll also need to pay closing costs to finalize the loan.

Reverse mortgage (HECM)

Instead of a home equity loan, you can also explore a reverse mortgage. A Home Equity Conversion Mortgage (HECM) is a type of reverse mortgage insured by the FHA that's designed for homeowners aged 62 and older. HECMs allow these homeowners to convert a portion of their home equity to cash either through a single lump sum, a credit line, or regular monthly payments.[6]

Homeowners keep the house title and must continue to pay property taxes and homeowners insurance. The loan becomes due when the borrower sells the home, moves to a new primary residence, or passes away.[7] In 2026, the FHA set the HECM borrowing limit at $1,249,125.[8]

Reverse mortgages can be advantageous thanks to no required monthly payments and the ability to stay in your home. However, this option isn't without its tradeoffs. Your total mortgage balance — and interest paid on that balance — increases as you borrow (and lose) more equity. And as with any new mortgage, you'll need to pay closing costs.

Seniors and caregivers, take special note: Reverse mortgage funds can affect eligibility for certain need-based benefits, including Medicaid and Supplemental Security Income (SSI). They do not impact Social Security benefits or Medicare. Interested borrowers can discuss this topic — and any potential impacts — during a mandatory counseling session approved by the Department of Housing and Urban Development (HUD).

If you're worried about leaving a large loan balance to your heirs, an FHA HECM ensures they'll never owe more than the home is worth. Heirs can repay the loan by selling the home or refinancing within a set time and keep any leftover equity.[9]

Alternatives to a home equity loan

Let's say you can't qualify for a home equity loan option because you don't meet age, income, or other necessary qualifying criteria. Or maybe you just don't want to take on another loan at your age. What other options do you have to get more readily available cash? Here are two to consider.

Home equity investment / shared equity agreement

A home equity investment, also called a shared equity agreement, involves a company giving you a lump sum in exchange for a share of your home's future value.[10] This option comes with no required monthly payment and no income or credit requirement, making it an alternative for people who cannot get a HELOC.

But there are some serious cons about these agreements to weigh. Upon a triggering event, which includes the sale of the home or the term ending, you (or your heirs) must repay the original amount plus the company's share of appreciation. Often, this is a substantial amount of money to repay at once and can sometimes run you hundreds of thousands of dollars, depending on home appreciation and the company's stake.

Shared equity agreements are also not as readily available as home equity loans, although their footprint is growing. And because they aren't a loan, they don't come with the same consumer protections, and the contracts can be difficult to understand. Make sure all aspects of these agreements are clear before signing one.

Selling and downsizing

If you don't mind moving into a smaller space, you can opt for selling your home and downsizing to maximize your equity without taking on another loan or agreeing to a home equity investment.

Choosing this route means you don't need to worry about meeting qualifications or taking on more debt, and you'll get full access to your equity without lender limitations. In 2025, the typical home sale in the U.S. brought sellers $118,710 in profit, according to ATTOM.[11]

But you'll need to be prepared to give up your home. For senior homeowners, this can be an emotional and even a practical challenge. Homeowners in cognitive decline may value staying in a familiar place more than profiting from a sale. Plus, moving comes with its own costs, and there's no guarantee that you'll find suitable housing in your desired location for an affordable price easily.

Keep in mind, too, that the home sale tax exclusion might apply if you have a capital gain from selling a primary residence.[12]

How to get a home equity loan as a senior

You don't need a regular paycheck to qualify for a home equity loan as a senior. Here's how to get it done.

Understand what counts as income

Just because you don't earn a regular paycheck doesn't mean you don't have qualifying income for a home equity loan.
"Social Security, pensions, 401(k)/IRA distributions, annuities, and investment income all count as qualifying income for a HELOC," says Kruso. "Lenders just need proof it's stable and likely to continue, so award letters, 1099s, and a distribution history do the job."

Kruso shares a recent example:

Lenders can also gross up, or inflate, non-taxable income to boost your qualifying income and lower your DTI.
"Since Social Security isn't taxed, lenders can gross it up, adding 15% on FHA loans and up to 25% on conventional, VA, and USDA loans before running your DTI," says Kruso.

Let's say you make $2,000 per month in non-taxable Social Security. That would count as $2,300 per month on an FHA loan (adding 15%) or up to $2,500 per month on a conventional loan (adding 25%). Note that your actual payments won't change — these values simply reflect what the lender counts as income.

Asset depletion, on the other hand, works differently. In this case, Kruso explains, the lender counts monthly income by taking a portion of your liquid assets — often 70% to 80% of retirement account balances — and dividing the value by the loan term in months. For example, $500,000 in retirement assets divided by 360 months can add about $1,000 to $1,400 per month in income.

Check your credit before applying

Knowing your credit score can help you narrow down the best option for leveraging your equity, so check your score before applying to see where you stand.

"Most lenders want 620–680 minimum, and 700+ gets you the best rate and terms," says Kruso. "DTI under 43% is the general target, though strong equity and assets can offset a higher ratio."

If your credit is just below that threshold, pay down revolving balances and check your report for any errors to dispute. Sometimes credit unions and portfolio lenders may be more lenient with credit criteria. But if your credit score still doesn't cut it, you can pivot to other options that don't consider credit, such as a reverse mortgage or a home equity investment.

Get your paperwork together

There's a lot of documentation involved with applying for a home equity loan or reverse mortgage. Get everything organized, including award letters, distribution statements, and any power of attorney paperwork from the start to ensure a smooth and swift process.

But you're not done there. Seniors may need to provide extra proof to lenders that retirement income will be stable and reliable.

"Age can't legally be used against a borrower, but friction still shows up in practice," says Kruso. "Lenders often ask for extra documentation proving retirement income will continue for three years, and family or power-of-attorney complications can slow things down even when nothing improper is happening."

Shop for a lender

You might be tempted to shop around with big, well-known banks, but don't forget about credit unions or portfolio lenders, especially those that manually underwrite loans. These types of lenders tend to be more forgiving with retirement income than bigger banks.

Kruso also warns that when choosing a mortgage lender, you should avoid those with prepayment penalties, products that require a balloon payment, or policies that force full draws at closing.

Overwhelmed by the prospect of shopping your profile around to various lenders? You might try working with a broker who can do the task for you.

Connect with a loan officer to make a plan

Whether you’re ready to tap your home equity today or are simply curious about your options, connecting with a loan officer can help. An experienced loan officer can look at your complete financial picture, explain your options, and find the best financing strategy for your specific goals.

Whether you need a home equity loan, a HELOC, a cash-out refinance, or something else entirely, we'll work through the numbers with you and make sure you're confident in your decision at every step. Get started with a free quote from Best Interest Financial today.

FAQ

Can a 70-year-old get a home equity loan?

Yes. There is no maximum age for a home equity loan or HELOC — the Equal Credit Opportunity Act bars lenders from denying credit based on age. What matters is qualifying income (Social Security, pension, and retirement-account withdrawals all count), your credit score, home equity, and debt-to-income ratio. A 70-year-old with documented income and solid equity can absolutely qualify.

Can you get a home equity loan on a paid-off house?

Yes, and owning free and clear helps. With no first mortgage, all of your home's value is available equity, so you can typically borrow a larger amount and the loan simply becomes a first lien. You'll still need to qualify on income and credit — or, if that's a hurdle, consider a reverse mortgage or home equity investment, which lean on equity rather than income.

Will a home equity loan or reverse mortgage affect my Social Security or Medicare?

No. Loan proceeds aren't taxable income and don't affect Social Security or Medicare, which aren't need-based. However, need-based programs like Medicaid and SSI have asset limits, so a large lump sum sitting in the bank could affect eligibility. If you rely on those programs, talk to a benefits counselor or elder-law attorney before borrowing.

What's the best home equity option for a senior on a low, fixed income?

It depends on whether you can qualify on income and credit. If you can, a fixed-rate home equity loan gives a predictable payment that's easier to budget. If income or credit is a barrier, a reverse mortgage (62+) or a home equity investment can work because they're based on equity, not income — and they carry no required monthly payment.

What happens to a home equity loan when the borrower dies?

With a standard home equity loan or HELOC, the remaining balance is paid from the estate, usually when the home is sold or refinanced by the heirs. With a reverse mortgage, heirs typically repay the loan (often by selling or refinancing) within a set period and keep any leftover equity; on an FHA HECM they'll never owe more than the home is worth.