HELOCs for Seniors: Should You Tap Into Home Equity for Retirement?

Our experts recommend home equity lines of credit (HELOCs) for seniors who need flexible financing options, especially for essential expenses, planned home improvements, or strategic cash flow management in retirement.

However, they caution against using a HELOC for non-essential expenses or without a clear repayment plan because it can affect finances and future plans. In this guide, we’ll cover the potential benefits and risks of using a HELOC as a senior, helping you determine whether it’s a smart financial choice.

How common is home equity use among seniors?

As seniors approach or enter retirement, home equity often becomes one of their largest financial assets. The statistics below highlight the role of home equity in retirement:

1. 80% of seniors own their homes outright, giving them substantial equity they can tap into if needed.
2. More than half of homeowners aged 65+ have over $200,000 in home equity, making it a potential financial resource.
3. Approximately 15% of seniors consider using home equity to supplement their retirement income, according to a recent Fannie Mae survey.
4. Home equity represents about 75% of the average senior’s total net worth, making it a significant part of their financial stability.
5. The average homeowner gains $34,000 in home equity annually due to home appreciation (as of recent data), which can add up to substantial value over time.
6. 56% of baby boomers say they plan to stay in their homes for the foreseeable future, leading many to invest in aging-in-place renovations.

Given these figures, home equity often acts as a form of “savings” for seniors—funds that can be tapped when needed, especially for essential expenses.

When does it make sense for seniors to use a HELOC?

A HELOC can be a versatile financial tool for retirees, but it works best in situations that justify borrowing against home equity. Here are several real-world scenarios where a HELOC may make sense:

• Essential home modifications: A HELOC can be a smart choice for financing modifications to help you age in place, such as installing ramps, stairlifts, or walk-in showers. These renovations can increase your home’s value and enhance its safety and comfort.
• Bridge income gaps: If you’re holding off on Social Security or retirement account withdrawals to maximize benefits, a HELOC can supplement your income. This way, you can avoid withdrawing from investments during market downturns and instead use home equity strategically.
• Pay off high-interest debt: Retirees with high-interest credit card debt may benefit from using a HELOC to consolidate their balances. HELOCs often come with lower interest rates, helping reduce monthly payments and pay off debt faster.

In these cases, a HELOC may provide affordable borrowing, especially if you have a stable plan to repay the debt.

When a HELOC may not be best choice for retirees

I typically wouldn’t want a senior to obtain a HELOC if they can’t pay off the loan in their projected remaining life expectancy unless they’re using it to renovate their home or make the home more functional as they age in place.

If you’re considering the HELOC for a “want” over a need, I would advise against the HELOC and recommend forgoing the purchase or saving for it.

If you’re considering the HELOC to pay off credit cards or other personal loans, be sure the HELOC offers a better interest rate and terms before proceeding. If in doubt, consult a financial counselor or professional who will help you make decisions with your financial and life goals in mind.

Erin Kinkade, CFP®

Our experts don’t always advise using a HELOC. Here are situations where seniors may want to avoid tapping into their home equity:

• Funding non-essential expenses: A HELOC may not be ideal for discretionary purchases, such as vacations, luxury items, or lifestyle upgrades. This is still debt, and using it for non-essentials could strain retirement finances.
• Unstable finances or health: If you lack a reliable income source or have significant health uncertainties, a HELOC might introduce financial risk. Failing to keep up with payments may jeopardize your home, which could be detrimental in later stages of life.
• Leaving a legacy: If you plan to leave your home to heirs, using a HELOC could reduce the inheritance you pass down. Home equity is often a substantial asset for retirees, and borrowing against it could diminish its value over time.

Pros and cons of HELOCs for seniors

Using a HELOC as a senior has advantages and potential downsides to consider. 

Pros

• Competitive interest rates

  HELOCs typically have lower interest rates than other credit types, making them an affordable borrowing option.

• Flexible borrowing and repayment

  You can withdraw funds as needed, often over a draw period of up to 10 years.

• Potential tax deduction

  HELOC interest may be tax-deductible if used for home improvements, offering financial relief.

Cons

• Risk of foreclosure

  HELOCs are secured by your home, so missing payments could result in foreclosure.

• Reduced home equity

  Borrowing reduces your equity and may affect future financial flexibility.

• Debt passed to heirs

  Upon the borrower’s death, HELOC balances may pass to the estate, potentially affecting heirs’ finances.

We recommend clients have access to their home equity in the form of a HELOC. The advantages to having one in place include:

• The potential tax benefits from the interest paid can be itemized on your taxes (but we recommend you consult a tax professional).
• They allow for flexible use of funds in case you have an emergency or need a certain amount.
• HELOCs are based on the prime rate, which tends to be an attractive short-term rate and in line with other secured debt options.

Disadvantages may include:

• As with any variable-rate debt, the interest rate could fluctuate.
• If you overuse the HELOC and can’t pay off the debt, you risk your home as collateral on the HELOC.
• If you are retired, depending on the lender, credit underwriting will be required to approve you.

Eric Kirste, CFP®

How to use HELOC funds in retirement

HELOCs offer flexible funds for various uses. Here’s how retirees might leverage a HELOC:

• Home improvements and aging in place: From safety installations to major remodels, HELOCs can fund improvements that turn your house into a livable post-retirement home.
• Supplement retirement income: HELOCs can bridge temporary income gaps, helping avoid early withdrawals from retirement accounts.
• Debt consolidation: With a HELOC, seniors can pay off high-interest debt, streamlining payments and potentially saving on interest.

Best HELOCs for seniors

After comparing options, here are our two top-rated HELOC lenders for seniors based on competitive rates, service, and features:

Figure

Best Overall

4.9 _/5

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Why Figure is one of the best for seniors

Figure is our top choice for seniors looking to tap their home equity due to its streamlined, efficient process and favorable terms. Figure’s fixed rates ensure a stable and predictable repayment schedule, which is crucial for retirees on fixed incomes. The ability to check rates without affecting your credit score and the option for no in-person appraisal simplifies the application process. 

Figure can deliver funding in as few as five days. You must access 100% of the funds at closing, minus an origination fee of up to 4.99%, so a Figure HELOC is best for retirees who plan to use their full credit line right away. The ability to redraw funds up to 100% offers flexibility to manage unexpected expenses. 

Figure’s process is 100% online, making it a perfect choice for tech-savvy seniors.

• Eligible homeowners can borrow up to $400,000
• All HELOCs come with a fixed rate
• 100% online application and appraisal
• Receive funds in as little as five days
• Redraw up to 100% of your funds
• Check your rate without affecting your credit score
• Figure offers online and video notary support, with an average response time of less than 45 seconds.
• No closing costs 
• No out-of-pocket costs
• Borrow against a primary home, second home, or investment property

• Charges an origination fee
• The full loan amount is drawn at origination
• Not available in Hawaii, Kentucky, New York, Texas, or West Virginia

Loan terms

Rates (APR)	7.45% – 16.15%*
Loan amounts	$20,000 – $400,000
Repayment terms	Draw: 5 years / Repayment: 5, 10, 15, or 20 years

Eligibility requirements

• Property must be a single-family residence, townhome, or planned urban development. Most condos are eligible properties
• Ineligible properties include co-ops, commercially zoned real estate, and others mentioned in the outline
• Title changes within the last 90 days or properties in below-average condition are also ineligible
• Eligible in 45 U.S. states and Washington, D.C. 
• You must have 30% or higher equity in your home
• Excluded states: Hawaii, Kentucky, New York, Texas, and West Virginia.
• Maximum loan-to-value (LTV): Up to 95% LTV—this is a combined LTV among all home loans
• Maximum debt-to-income: Up to 50%
• Minimum credit score: 640

Bethpage FCU

Best Credit Union

4.7 _/5

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Why Bethpage is one of the best for seniors

Bethpage Federal Credit Union stands out as the best credit union choice for seniors seeking a HELOC, especially for those prioritizing low costs and flexibility. Bethpage accommodates a broad range of financial needs, from minor renovations to major living expenses. It charges zero application, origination, or appraisal fees, and Bethpage will cover your closing costs.

Bethpage offers qualified borrowers an appealing 12-month fixed introductory rate, allowing for predictable repayments at the beginning of the loan term. The option to convert some or all of the HELOC to a fixed-rate loan at no extra cost provides further financial stability and can benefit retirees managing fixed incomes.

The process from application to closing can take six to 10 weeks, which is slower than Figure, but the savings and benefits may outweigh the wait for many. Note that to qualify for the low fixed introductory rate, you must withdraw a minimum of $25,000 at closing. Overall, Bethpage offers a compelling choice for seniors looking for comprehensive features and cost-effective borrowing from a trusted credit union.

• Low fixed interest rate for the first 12 months on HELOCs of $25,000 or more for VantageScores of 720 and up¹
• No closing costs²
• $0 in application, origination, and appraisal fees
• Ability to convert portions of your HELOC to fixed-rate loans³
• Rate discounts are available if you schedule payments from a Bethpage personal savings or checking account

• Funds available within 35 days, on average
• No prequalification form with a soft credit check
• Bethpage doesn’t disclose income or debt-to-income (DTI) requirements online
• Required minimum credit score of 670

Loan terms

Rates (APR)	12-month intro rate of 6.99% for VantageScores of 720 and up; then a variable rate
Loan amounts	$10,000 – $1 million
Repayment terms	Draw: 10 years / Repayment: 20 years

Eligibility requirements

Bethpage doesn’t disclose every eligibility requirement, such as which properties qualify and the income or DTI you need to be approved. However, here are some of the eligibility requirements listed on the Bethpage website:

• For Bethpage’s introductory rate, the maximum LTV is 75%
• Minimum credit score for borrowers is 670
• Membership at Bethpage is required
• Hazard insurance and/or flood insurance is required for loans secured by property

Read More

Best Home Equity Line of Credit (HELOC) Rates & Lenders 

How to qualify for a HELOC as a senior

Although age can’t legally prevent you from getting a HELOC, seniors should meet these criteria:

• Adequate home equity: Generally, 15% equity or more is needed to qualify.
• Credit and income requirements: Strong credit and reliable income, including retirement or Social Security income, can improve your eligibility.
• Acceptable debt-to-income ratio (DTI): A DTI of 43% or lower is usually ideal for approval.
• Supporting documentation: Required documents often include bank statements, benefits statements, and recent pay stubs or tax returns.

Alternatives to HELOCs for seniors 

If a HELOC doesn’t meet your needs, consider these alternatives:

• Home equity loan: Ideal if you prefer a lump-sum loan with a fixed rate for predictable payments.
• Reverse mortgage: This option allows access to home equity without monthly payments, though it may reduce the inheritance passed to heirs.
• Cash-out refinance: Refinancing may be beneficial if today’s mortgage rates are favorable, providing a lump-sum cash payout.
• Home sale-leaseback: This arrangement allows you to sell your home but remain as a renter, extracting equity without relocating.

Recap of the best HELOCs for seniors