Four main options: downsize to a smaller home and cash out the difference, get a reverse mortgage (age 62+) to access equity without monthly payments, take out a HELOC for flexible access, or build an ADU for rental income. Plan ahead and consult a financial advisor to choose the best strategy for your retirement goals.
Options for Accessing Home Equity in Retirement
Downsizing is the simplest option: sell your current home, buy something smaller for less, and pocket the difference. A reverse mortgage lets homeowners 62+ access equity with no monthly payments, but comes with fees and reduces inheritance. A HELOC gives flexible access but requires monthly payments. An ADU (accessory dwelling unit) generates ongoing rental income without selling.
Comparing the Options
Downsizing: one-time cash, lower ongoing costs, no debt. Reverse mortgage: no monthly payments, but high upfront costs, equity decreases over time. HELOC: pay interest only on what you use, but variable rates and requires income to qualify. ADU rental: ongoing income stream, but construction costs and landlord responsibilities.
Planning Ahead
Start thinking about your equity strategy 3-5 years before retirement. Pay down your mortgage to increase available equity. Keep the property well maintained. Consider energy-efficient upgrades to reduce ongoing costs. Talk to a financial planner who understands real estate to model your options. The right choice depends on your health, family situation, and long-term goals.