NCOA National Council on Aging

Help With Decision Making



Many adults age 55+ are eligible for benefits from more than 2,000 federal, state, and private programs. Use BenefitsCheckUp to identify the benefits that could help you pay for prescription drugs, health care, utilities, and other basic needs.

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Tapping the equity in your home can give you extra cash to help you cover a major expense or pay your day-to-day expenses. The question is whether you have enough equity to generate an income stream that will allow you to maintain your lifestyle. If not, you will need to consider other options such as part-time work or downsizing.

Key Principles to Help Guide Your Decision

It is important to think about how you plan to use additional funds so that you can select the type of home loan that fits your needs. Are you facing a one-time need for cash? Or do you need regular withdrawals from home equity

A home equity loan might be the ideal solution for a one time expenditure like a home renovation. If you need regular cash payments, a reverse mortgage will allow you to turn your home equity into monthly income so you can stay at home for as long as you want. Make sure you clearly understand how much you need to borrow and the costs of these loans.

If you invest your assets in conservative instruments such as money market funds, CDs, and bonds, the current low yields from these investments may not keep up with inflation. This situation will undermine your cash flow over time.

Investigate the potential for securing funding from federal, state, local, and private programs that provide benefit payments for utility bill, meals, prescription drugs, and other needs.

Ongoing budget shortfalls may be a sign that it time to move to a more-affordable place to live. If your current expenses are too much to handle, then a home equity loan may just be delaying the inevitable.

Potential Risks and Limitations

Many people are proud of their ability to live independently on a limited income. However, you will want to avoid pinching pennies and cutting corners to make ends meet. If you paid off your mortgage, you will want to be careful not to add debt to your home. Consult with a family member or speak with a trusted advisor to explore the options for increasing your income with limited cost.

There are many predatory lenders who target seniors. Beware of scams when tapping the equity in your home.

If you have a sizable existing mortgage, you may not get enough funds each month from a reverse mortgage to significantly increase your well-being.

Action Steps

Check the Solutions For You listed above to get more detailed information about your options to increase income.

Think carefully about the tradeoffs that you are willing to make to increase your income by using a home equity loan.  Keep an eye on cash flow. To manage your budget, pay close attention to your spending.

Evaluate all your income options or look for ways to reduce your monthly expenses.

See if you qualify for help from government programs. You may be able to avoid tapping home equity or draw it down more slowly, if you supplement your income with public benefits.

If you are worried you might outlive your retirement savings, think carefully about when to start collecting Social Security or the payment stream from a defined benefit plan. If you retire “early,” your monthly payments will be lower than if you wait a few more years.

If you decide not to tap home equity, use credit cards sensibly.