At Newrez, we want to help you make smart, confident choices at each step in your homeownership journey, no matter your age. If you’re a senior, you may be considering using the equity you’ve built up in your home to unlock some financial flexibility. We’ve put together a few tips to help you make informed decisions and get the most out of your later years.
Evaluating Your Home Equity Borrowing Options
Home equity can be accessed in several ways, depending on your needs. Be sure to look over your long-term financial plan so you know what you can afford.
Home Equity Loan††
A home equity loan is a second independent mortgage that, if you qualify, gives you a lump sum of cash after closing. Repayment works just like your primary mortgage, with a fixed interest rate.
Why This May Work for Seniors: This may be ideal for seniors with a clear one-time expense such as a medical bill or planned home renovation, and can be paid back at a predictable amount each month. Learn more about the Newrez Home Equity Loan.
Home Equity Line of Credit (HELOC)^
A HELOC is a revolving line of credit secured by your home’s equity. A HELOC works something like a credit card in that you have a set amount of money available to borrow and pay back. With a HELOC, you are able to borrow up to your limit only during the draw period (3-10 years). Following that is a repayment period (10-20 years).
Why This May Work for Seniors: A HELOC may give older homeowners the flexibility to cover unexpected costs while on a fixed income. Learn more about the Newrez HELOC.
Reverse Mortgage
A reverse mortgage is a type of loan that allows homeowners aged 62 and older to borrow money using the equity in their home as collateral. Unlike a traditional mortgage where you make monthly payments to pay down the loan, a reverse mortgage typically doesn't require monthly payments while you live in the home as your primary residence. The loan generally becomes due when the home is sold or the borrower permanently moves out.
Newrez only carries reverse mortgages in certain markets and through certain channels, but since reverse mortgages are tailored especially to senior borrowers, it’s a good idea to understand how they work.
Certain reverse mortgages (Home Equity Conversion Mortgages) are government-backed, and require borrowers to complete counseling with a Department of Housing and Urban Development®-approved counselor, as well as meet stringent requirements.
If you’re interested in a reverse mortgage, use caution and do your research when seeking one. Some fraudsters offer “reverse mortgages” and apply high-pressure sales tactics in an attempt to take advantage of seniors and get access to their equity.1
Cash-Out Refinance†
This option allows you to refinance your existing mortgage to get cash from it. While a cash-out refinance could be simple in terms of only having one monthly payment, older borrowers may want to make sure they have the financial ability to rework their mortgage if they’re on a fixed income. Learn more about a cash-out refinance.
Quick Equity Product Breakdown:
|
Loan Type |
Monthly Payment |
Interest Rate |
|
Home Equity Loan |
Principal and interest paid monthly |
Fixed |
|
HELOC |
Pay interest only during draw period (Newrez) then pay principal during repayment period |
Variable, based on prime rate |
|
Reverse Mortgage |
Upon sale or move out |
Fixed or variable |
|
Cash-Out Refinance |
Principal and interest paid monthly |
Fixed or variable |
Tap Your Equity Wisely
Accessing your home’s equity can offer powerful financial relief, but it’s important to look at your full financial picture before taking the plunge. Home equity products use your home as collateral, meaning falling behind on payments could lead to consequences for your credit, or even foreclosure. For older Americans who may be on a fixed income or who may be dealing with increasing medical costs, it’s particularly important to make sure using your equity makes sense as a part of your larger financial plan. With a good plan in place, home equity can be used responsibly to reach greater financial freedom.
If you’re not sure what makes the most sense for you, reach out to one of our mortgage experts, who will be glad to walk you through your options.
References:
1 Fraud Bulletin - Reverse Mortgage Scheme, February 2025
^ This HELOC is an open-end line of credit, available on owner occupied properties, where 75% of the approved full credit limit (minus the origination fees) will be drawn at the time of closing. Additional draws may be available after a 90-day period within the first 3 years not to exceed the available credit limit. Actual rates available to you may vary based on several factors including your credit score and combined loan-to-value. Loan amounts range from $50,000 to $350,000. We may determine home value and resulting equity through independent data sources and automated valuation models. Only available for eligible borrowers and property types. Not all applicants will be approved, pre-approval is based on data you have provided and certain assumptions that must be verified and subject to underwriting approval. Not available in all states or territories. Contact Newrez for more information.
