Your options
There are four common ways to use home equity in retirement. Each one fits a different goal.
- Home equity loan: a lump sum at a fixed rate, paid back monthly, while you keep your first mortgage.
- Cash-out refinance: a new, larger first mortgage that pays you the difference in cash.
- Reverse mortgage: a loan for older homeowners that you don't repay monthly. It's usually repaid when you sell, move out or pass away.
- Downsizing: selling and buying or renting a smaller home, and keeping the difference.
Home equity loan or cash-out refinance
Both give you cash and come with a monthly payment. If you have a low rate on your mortgage, a home equity loan lets you keep it. If you own your home free and clear, either option can work.
A CapCenter home equity loan runs from $50,000 to $250,000, with a fixed rate for 15, 20 or 30 years, on single-family primary residences and second homes. The maximum depends on the loan type and purpose, and a loan consultant can tell you yours. Both options come with ZERO Closing Costs (restrictions apply; see Offer details).
How lenders count retirement income
You don't need a paycheck to qualify. Lenders look at steady income you can document, such as:
- Social Security benefits
- Pensions and annuities
- Regular withdrawals from retirement accounts
- Investment, rental or part-time income
Reverse mortgages
A reverse mortgage lets homeowners, usually 62 or older, borrow against equity without a monthly mortgage payment. You still pay property taxes, insurance and upkeep. Interest adds to the balance over time, so less equity is left for you or your heirs.
CapCenter doesn't offer reverse mortgages. The most common type, a federally insured HECM, requires a session with a HUD-approved counselor first. Also note that a home with a reverse mortgage isn't eligible for a CapCenter home equity loan.
Downsizing
Selling a larger home can free up cash and lower your costs for taxes, insurance and upkeep. Selling has its own costs, like agent fees and moving. Tax rules on home sale gains can let many owners keep some or all of their profit tax-free if they meet ownership and use tests, so talk with a tax professional about your situation.
Questions to weigh
- Can your fixed income cover a new payment for the whole term?
- How long do you plan to stay in the home?
- Would new income or cash affect taxes or benefits?
- How much equity do you want to leave to heirs?
- Is there a cheaper source of cash, like savings you can draw on?
Talk it through
A financial advisor and a tax professional can help you weigh borrowing against other retirement income. Bring family into the conversation if the home is part of your estate plan. Your loan consultant can explain payments and terms.
