HECM, HELOC, or Just Sell? Which One Fits You?
- Bob Wiltse
- Jun 17
- 5 min read
Tap Your Home's Value Without Selling: Here's How to Weigh It
Bob Wiltse, REALTOR® SRES®
June 17, 2026
Here’s a problem a lot of us know well.
The mortgage is paid off, or nearly so. The house is worth more than ever. But the checking account is tight, and prices keep climbing.
You’re house-rich but cash-short.
You’re not alone.
Homeowners age 62 and older held a record $14.66 trillion in housing wealth during the third quarter of 2025, according to the National Reverse Mortgage Lenders Association (NRMLA) and RiskSpan. That is one of the largest pools of household wealth in America. [Source 1]
At the same time, most older adults want to stay put. According to AARP’s 2024 Home and Community Preferences Survey, 75% of adults age 50 and older would like to remain in their current home for as long as possible. [Source 2]
The challenge is simple.
How do you turn some of that home equity into usable cash without packing boxes and moving?
Let’s look at the most common options.
The HECM (Reverse Mortgage)
A Home Equity Conversion Mortgage, or HECM, is the federally insured reverse mortgage program backed by the Federal Housing Administration (FHA).
To qualify, you must be at least 62 years old and live in the home as your primary residence.
With a HECM, you borrow against your home’s equity. Unlike a traditional mortgage, no monthly principal and interest payments are required. The loan is usually repaid when the last borrower sells the home, permanently moves out, or passes away.
For 2026, the FHA will consider home values up to $1,249,125 when calculating borrowing limits, an increase from $1,209,750 in 2025. [Source 3]
You can receive the proceeds in several ways:
A lump sum
Monthly payments
A line of credit
A combination of the above
One Feature Most People Don’t Know About
The HECM line of credit has a unique benefit.
Any unused borrowing capacity grows over time.
For example, if you establish a $200,000 line of credit and never use it, the amount available to borrow can increase over the years. Many retirees use a HECM line of credit as a safety net for future health care costs, home repairs, or market downturns.
The Costs
A HECM is not free money.
The upfront mortgage insurance premium is 2% of the home’s FHA-eligible value. On a high-value home, this can exceed $24,000. Most borrowers finance this cost into the loan instead of paying out of pocket. [Source 4]
There are also origination fees, closing costs, and servicing expenses.
You must continue paying:
Property taxes
Homeowners insurance
HOA fees, if applicable
Home maintenance expenses
Failing to meet these obligations can result in default.
Because no monthly mortgage payments are required, the loan balance generally grows over time. This means less equity may remain for your heirs.
The good news is that HECMs are non-recourse loans. Neither you nor your heirs will owe more than the home’s value when the loan becomes due. [Source 4]
A Potential Drawback for Long-Term Care Planning
A reverse mortgage works best when you expect to remain in the home for several years.
If you move permanently into assisted living, memory care, or another long-term care setting, the loan generally becomes due because the home is no longer your primary residence.
For that reason, health and long-term care plans should be part of the conversation before moving forward.
HECM for Purchase
Many people don’t realize that reverse mortgages can also help you buy a new home.
The HECM for Purchase program allows eligible buyers to purchase a new primary residence using a large down payment and a reverse mortgage.
For example, a retiree might sell a longtime family home in Massachusetts and use part of the proceeds to buy a smaller home in South Carolina while avoiding a traditional monthly mortgage payment.
For seniors who want to downsize, relocate, or move closer to family, this option can be worth exploring.
HELOCs and Home Equity Loans
A Home Equity Line of Credit (HELOC) works like a credit card secured by your home.
You borrow only what you need and pay interest on the amount you use.
A home equity loan provides a lump sum upfront with fixed monthly payments.
Both products typically have lower upfront costs than a reverse mortgage.
The downside is simple.
Monthly payments are required.
If you fall behind, the lender can foreclose.
As of mid-2026, many HELOC rates are in the mid-7% range, while fixed-rate home equity loans often carry rates near 8%, depending on the lender and borrower qualifications.
These loans may work well for homeowners who need temporary access to cash and have sufficient income to comfortably handle the payments.
Cash-Out Refinancing
Another option is a cash-out refinance.
This replaces your existing mortgage with a larger mortgage and provides cash from the difference.
For many retirees, however, this option is less attractive today.
Why?
Millions of homeowners currently have mortgage rates below 4%.
Replacing a low-rate mortgage with a new loan at today’s higher rates can dramatically increase monthly housing costs.
For homeowners with low-rate mortgages, a cash-out refinance often makes the least sense financially.
Selling and Downsizing
Sometimes the simplest solution is the best one.
By selling your home, you unlock all of your equity at once.
You eliminate future maintenance costs, reduce utility bills, and can significantly lower your overall housing expenses.
Of course, moving has costs too.
There are real estate commissions, moving expenses, emotional stress, and the challenge of leaving a home full of memories.
Still, many retirees find that downsizing improves both their finances and their quality of life.
A smaller home often means:
Less maintenance
Lower utility costs
Less cleaning
Easier accessibility
More flexibility in retirement
There is no shame in deciding that the house that served you well for 30 years no longer fits your needs today.
Which Option Fits Which Situation?
If Your Goal Is… | Consider Exploring… |
Emergency backup funds | HECM line of credit |
Extra monthly income | HECM monthly payments |
Access to short-term cash | HELOC |
One-time lump sum | Home equity loan |
Relocating or downsizing | HECM for Purchase |
Reducing housing expenses | Selling and downsizing |
What About Taxes?
This is one of the most common questions.
Reverse mortgage proceeds, HELOC advances, and home equity loan proceeds are generally considered borrowed money, not income. That means they are typically not subject to federal income tax. Consult a qualified tax professional regarding your individual circumstances.
Next Steps This Week
Determine your home’s approximate market value.
Subtract any mortgage balance to estimate your available equity.
Calculate your monthly income gap or cash need.
Explore a HECM calculator to estimate potential borrowing power.
Speak with a HUD-approved housing counselor.
Meet with a financial advisor or attorney before making a final decision.
The best solution is rarely about maximizing cash.
It’s about finding the option that supports your lifestyle, protects your financial security, and helps you live where and how you want during retirement.
Know someone facing this choice? Pass it along.
Sources
Source 1: National Reverse Mortgage Lenders Association (NRMLA) / RiskSpan Reverse Mortgage Market Index
Source 2: AARP 2024 Home and Community Preferences Survey
Source 3: U.S. Department of Housing and Urban Development (HUD) 2026 HECM Lending Limits
Source 4: HUD Home Equity Conversion Mortgage (HECM) Program Information
Disclaimer
This article is for educational purposes only and should not be considered financial, legal, tax, or investment advice. Reverse mortgages, HELOCs, home equity loans, and other borrowing strategies involve risks and costs that vary by individual circumstances. Consult a HUD-approved counselor, licensed financial advisor, tax professional, or attorney before making any financial decision.
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