The options at a glance
| Option | How you get money | What you repay | Main risk |
|---|---|---|---|
| HELOC | Credit line you draw on | Monthly payments; variable rate | Payment shock; foreclosure if you fall behind |
| Home equity loan | Lump sum | Fixed payments | Foreclosure if you fall behind |
| Reverse mortgage (HECM) | Lump sum, monthly payments or a line of credit | Usually nothing monthly; repaid when you move, sell or die | Equity shrinks; you must keep up taxes and insurance |
| Home equity investment | Lump sum for a share of future value | One large payment at the end of the term or on sale | Hard-to-predict, often high cost; forced sale |
| Sale-leaseback | You sell the home and rent it back | Rent | You no longer own the home; rent can rise; eviction |
HELOC
Pros: borrow only what you need, pay interest only on what you've drawn, and keep your low first-mortgage rate. Cons: usually a variable rate, a payment jump when the draw period ends, and the lender can freeze the line if values fall. See what a HELOC is and the HELOC calculator.
Home equity loan
Pros: a lump sum, often at a fixed rate with predictable payments, and your first mortgage stays as is. Cons: you pay interest on the whole amount from day one, plus closing costs. Use the home equity loan calculator and compare in HELOC vs home equity loan.
Reverse mortgage (HECM)
A Home Equity Conversion Mortgage is FHA-insured. HUD requires that you:
- are 62 or older,
- own the home outright or have paid it down considerably,
- live in it as your principal residence,
- aren't delinquent on any federal debt, and
- attend an information session with a HUD-approved HECM counselor.
Adjustable-rate HECMs can pay you in equal monthly amounts for as long as you live there (tenure), for a fixed number of months (term), as a line of credit, or a mix; fixed-rate HECMs pay a single lump sum. There's an initial mortgage insurance premium of 2% at closing and an annual premium of 0.5% of the balance. Pros: no required monthly loan payment. Cons: the balance grows, leaving less equity for you or your heirs, and you must keep paying property taxes, insurance and HOA dues and keep the home up to FHA standards.
Home equity investments (shared equity agreements)
A company pays you cash now in exchange for a share of your home's future value. There are no monthly payments, but the CFPB warns that you must repay with a single payment whose amount can be difficult to predict, usually after 10 to 30 years or when you sell. If you can't pay, you may have to sell or face foreclosure. In the CFPB's example, a $50,000 payment could require roughly $68,000 to $71,500 after three years, and anywhere from about $25,000 to $831,000 after 30 years, depending on home prices. The CFPB also found many contracts grow at 19.5% to 22% a year in early years, that companies may dispute your home's value, and that their lien can make it harder to refinance.
Sale-leaseback
You sell your home to a company and rent it back. The FTC warns the risks are often hidden in the fine print: steep fees, high rent that can rise, and eviction if you can't pay. You become a renter and no longer own the home. Don't rush, walk away from pressure, and have a lawyer or trusted person review the documents.
Other routes
Selling and downsizing turns equity into cash with no new debt; see the home sale calculator. A cash-out refinance does involve refinancing, but compare it anyway with the cash-out refinance calculator.
Sources: CFPB HELOC booklet; CFPB: home equity loan vs HELOC; HUD: about HECM; CFPB Issue Spotlight: Home Equity Contracts (January 2025); FTC: sale-leaseback offers.
Every worked example on this page was checked with Calcist's own engine and an independent reference.