# Turn Your Home Equity Into Retirement Income

> Retirees sitting on housing wealth have three main options to convert it into spendable cash, each with different costs and trade-offs.
- Title: Turn Your Home Equity Into Retirement Income · Kiplinger
- Summary: Retirees sitting on housing wealth have three main options to convert it into spendable cash, each with different costs and trade-offs. Plan ahead by…
- Keywords: home equity, retirement income, reverse mortgage, home equity loan, heloc, retirees, housing wealth, downsizing, sequence of returns risk, medicare premiums, Turn, Home
- Source: Kiplinger — https://kiplinger.com/personal-finance/home-equity-loans/turn-home-equity-into-retirement-income
- Published: 2026-09-24T12:00:00+00:00
- Read time: 3 min
- Topics: home equity, retirement income, reverse mortgage, home equity loan, heloc, retirees, housing wealth, downsizing, sequence of returns risk, medicare premiums
## What is home equity
Home equity is your home's current value minus what you still owe on the mortgage. A $600,000 home with $100,000 left to pay has $500,000 in equity.
## The equity problem for retirees
Many retirees have far more wealth tied up in their house than in retirement savings, but home equity isn't money you can easily spend without taking action.
## Selling your home clears debt
Selling eliminates your mortgage entirely, but it often returns less than expected because listing estimates don't account for selling costs like commissions, inspections, and carrying costs.

> Cut 10% off the listing estimate before you plan anything around it.
## Real costs of selling
On a $650,000 sale, expect roughly $32,000 in commission, $12,000 in inspection items, and $4,000 a month in carrying costs. Sixty days on the market is normal.
## Downsizing may not free much
A smaller home in a newer or more convenient location may cost nearly as much as your current home, while sales fees absorb some of the difference.
## Three ways to borrow against equity
A home equity loan gives a lump sum with fixed payments. A HELOC lets you draw when needed and pay interest only on what you use. A reverse mortgage requires no monthly payments and is available from age 62.
## Why retirees struggle to qualify
Lenders focus on monthly income to repay loans, not equity. A homeowner with $700,000 in equity but only $3,200 monthly income may still struggle to qualify for a traditional loan.
## Asset depletion helps qualify
Some lenders treat retirement savings as though they're paid out monthly, often dividing the balance across 360 months. A $900,000 balance could add $2,500 a month of qualifying income.
## Reverse mortgage credit line grows
A reverse mortgage can be set up as a credit line that grows at the loan's interest rate plus half a percent. Someone opening a line at 62 with $200,000 available would have roughly $514,000 by age 77.
## Reverse mortgage vs HELOC reliability
A reverse mortgage credit line cannot be cut due to market conditions, while banks can freeze or cut HELOCs. This makes reverse mortgages more dependable for long-term planning.
## Avoid selling during downturns
Using a reverse mortgage credit line lets retirees avoid selling investments when markets fall. Selling after a downturn means selling more shares to raise the same cash, leaving fewer invested when markets recover.
## Reverse mortgage upfront costs
Reverse mortgages cost 2% of home value in government mortgage insurance premiums, up to the FHA lending limit. On a $600,000 home, that's $12,000 before lender fees, appraisal, and legal costs.
## Plan before you need money
Anyone between 60 and 65 with substantial equity should compare options before needing the money. Get a HELOC priced while income supports it, then compare what a reverse mortgage credit line opened at 62 could be worth.

> The decision that protects a retirement is rarely made when the money runs short. It is usually made years earlier.
## Key takeaway

Plan ahead by exploring home equity options between ages 60 and 65, before you need the money, because a reverse mortgage credit line opened early grows significantly larger than one opened later.