The mortgage is paid off, or nearly. And yet the checking account still runs tight at month’s end. For many people over 50, the largest asset they own is the one they live in, and it does not pay a dime until they act.
Several options can turn that equity into cash.
1. Reverse mortgage
A reverse mortgage lets homeowners age 62 and older borrow against their equity and skip the payments a normal mortgage demands. Most are home equity conversion mortgages (HECMs), insured by the Federal Housing Administration (FHA), taken as a lump sum, a line of credit, or monthly deposits.
The balance generally comes due when the last borrower sells, dies, or stops using the home as a main residence, with some protection for an eligible spouse who is not on the loan. For 2026, the FHA set the HECM maximum claim amount at $1,249,125, a ceiling for the calculation rather than the sum you can borrow, which turns on your age, home value, and rates.
If you’re 62 or older, you might be sitting on a goldmine without even realizing it. Your home isn’t just a place to live — it’s a powerful asset waiting to be unleashed. Savvy retirees are discovering how a Longbridge Financial reverse mortgage could be a smart move that frees up cash for you to use immediately.
The appeal is real. No monthly loan payment, you keep the house, and because the FHA-insured HECM is non-recourse, you or your heirs will never owe more than the home is worth. For someone short on cash but long on equity who plans to stay put, it can be a sensible way to fund retirement, as long as you go in with the full picture.
Remember that a reverse mortgage will shrink what your heirs inherit, as fees and mortgage insurance must be paid. And because the loan is not being paid down, interest compounds onto the balance every month. You also still owe property taxes, insurance, and upkeep. Fall behind and the loan can default, putting the house at risk.
2. Home equity sharing agreement
A home equity sharing agreement, sometimes called a home equity investment, hands you a lump sum today for a slice of your home’s value later. There is no monthly payment and no interest in the usual sense. When the agreement ends or you sell, you repay the original amount plus a share of the appreciation.
These can appeal to homeowners who are rich in equity but cannot comfortably take on another monthly payment. That is the draw.
The Consumer Financial Protection Bureau warned in 2025 that these contracts can carry surprisingly large repayment bills and make refinancing hard, and that the total cost is often higher than traditional mortgage-backed borrowing, though the result depends on the contract and what happens to your home’s value. Have a real estate attorney read the contract before you sign.
3. HELOC or home equity loan
Borrowing against your equity keeps the house and your ownership intact. A home equity line of credit, or HELOC, works like a credit card secured by your home: Draw what you need, pay interest only on the balance you use. A home equity loan hands over a fixed lump sum at a fixed rate with steady payments.
Because the house secures the debt, rates are generally lower than credit cards and often lower than personal loans. As of early August 2026, both HELOC and home equity loan averages sat in the low-7% range. Both also let you leave a low first-mortgage rate untouched, which a cash-out refinance would not.
The trade-off is the monthly payment. This is debt, secured by the house, so missed payments can lead to foreclosure, and most HELOCs carry a variable rate that can climb. It works best as backup cash flow for an occasional need, not a way to cover regular expenses.
4. Downsize and keep the difference
Selling and moving somewhere cheaper can release a big share of your equity without adding debt. The difference is yours to invest, spend, or hold in reserve.
As a single seller, you can exclude up to $250,000 of profit from capital gains tax, and as a married couple, up to $500,000, if you owned and lived in the home for two of the last five years. Those limits have not risen since 1997, while home values have climbed for decades.
A CoreLogic analysis found tthe share of sales by married couples with gains exceeding the $500,000 exclusion reached nearly 8% in 2023, and far higher in expensive markets like California.
Selling costs take a bite, too, from negotiable agent fees to closing costs and moving expenses. And if the taxable profit pushes your income past an IRMAA (income-related monthly adjustment amount) threshold, it could raise your Medicare premiums about two years later.
5. Rent out a room
Renting a spare room, or listing part of the house short-term, brings in cash without giving up the home or the equity. It takes some setup, from prepping the space to screening a tenant and checking local rules, but you retain more flexibility than if you take on a loan.
The income is generally taxable and reported to the IRS, though you may be able to deduct expenses tied to the rented portion. The one exception is that if a home you live in is rented for 14 days or fewer in the year, the IRS generally does not tax that income, though you forfeit the deductions. Short-term rentals may also trigger local occupancy taxes and permit rules.
Making the most of your home
The right choice depends on whether you need a short-term cash boost or long-term cash flow, how many years you expect to stay in the home, and how much of that trade you can live with.
Before you commit the biggest asset you own to a money move that is hard to undo, get advice. That might be a HUD-approved housing counselor before a reverse mortgage, and a tax professional before you sell.
If you have over $100,000 in savings, you may also want to consider getting advice from a pro. SmartAsset offers a free service that matches you to a vetted, fiduciary advisor bound to act in your best interests in under five minutes.
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