How To Take Advantage Of Your Home’s Equity In Retirement

Key Takeaways

  • Learning how to use equity in your home starts with researching the options available to you.
  • A home equity line of credit allows homeowners to utilize the equity they have built up in a given property for other expenses.
  • There are numerous benefits to utilizing a home equity line of credit, including the opportunity to invest in a second home.

As homeowners approach retirement, it is only natural to wonder how to use home equity for continued financial success. There are a number of ways to take advantage of the equity built up in a given property. For example, one can redirect those funds towards other projects, ranging from investment properties to home renovations. If used correctly, you may be surprised how much your home’s equity can assist you as you move into retirement. Keep reading to learn how to use home equity as a means of contributing to your financial future.

What Is Home Equity?

Home equity refers to the value a homeowner has in their home. In other words, as you pay off your mortgage you are building equity in that property. Homeowners can take advantage of home equity in a number of ways, such as a home equity line of credit, which provides the opportunity to borrow money from the equity built up in a property. Learning how to use a home equity line of credit can be particularly useful for homeowners approaching retirement, as it can represent the chance to use those funds elsewhere.

If you find yourself wondering how to calculate your home equity percentage, there are a few numbers you will need. It can be determined by looking at the current property value in relation to the remaining mortgage balance. For example, if a home is appraised at $100,000 and the homeowner has $75,000 left on the mortgage, the equity in the property would be $25,000. This would make your home equity percentage 25 percent.

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how to use equity in your home

How Does A Home Equity Line Of Credit Work?

A home equity line of credit, or HELOC, is one of several ways to utilize your home’s equity. It differs from other home equity loans in that borrowers do not receive a lump-sum payment, rather they are given access to a set amount of funds and can determine how much to use. A HELOC works by opening up a line of credit for borrowers, which can be thought of similarly to a credit card.

The process starts when homeowners apply with a lender. When determining your eligibility, they will consider a number of factors including the value of the property, the mortgage balance, the borrower’s credit score, income, and any outstanding debts. In addition to determining eligibility, these factors will also help lenders determine what percent of the home’s value the homeowner will have access to. Lenders often approve up to 80 percent of the home’s value, minus the remaining mortgage balance.

Once a HELOC has been granted, borrowers will be issued checks, or a special debit or credit card, so the funds are accessible. There will typically be withdrawal limits and requirements that borrowers should pay special attention to. Additionally, there will be a certain time period in which the borrowers may access the funds, typically ranging from five to thirty years at most. This time frame is often referred to as the draw period, and payments must be made by the borrower, though they are often interest only.

It is worth noting that there will be a pay off date on any HELOC, and the balance must also be paid in the event the property is sold. When homeowners utilize a HELOC, lenders are essentially taking a lien against the property, which means defaulting could put a homeowner at risk of foreclosure. Remember to mind due diligence and be sure to weigh the pros and cons of using home equity to your advantage.

How To Use Home Equity In Retirement

As homeowners build up equity, it is perfectly normal to want to use that money for other expenses. Remember that it is important to exercise caution when tapping into your home’s equity, but when done correctly it can subsidize a substantial part of your retirement. If you do decide to utilize a home equity line of credit, you can open yourself up to a number of opportunities. Here are just some of the benefits of a home equity line of credit:

  • Finance your homes improvements
  • Fund education costs
  • Pay off outstanding debts
  • Purchase a second home or vacation home
  • Invest in passive income properties

Home Improvements

Financing home improvements is often the most common reason homeowners will take out a home equity line of credit. In addition to financing renovations, home improvements can also raise the value of the home. This benefit can be particularly attractive to homeowners who may be downsizing in the future, and want to raise the value of the property before selling it. Often, the kitchen and bathrooms are great places to start when it comes to renovations. If you are interested in changing things up, be sure to read up on which home improvements add the most value to a property before deciding on a project.


A home equity line of credit can open up funds to be used towards continuing your education, or providing financial assistance to family members wishing to do the same. For example, if you are interested in learning more about real estate there are a number of real estate conferences that can help familiarize you with the industry. There are also training programs that can allow you to get started passive income investing as you begin to prepare for retirement. On the other hand, if you have children or other family members approaching college age, tapping into your home’s equity can be a a great way to provide financial assistance. However, when it comes to financing education, be sure to look at the other funding options available before utilizing your home’s equity. There are often a number of student loan options that can provide the same funds with less risk.


It is not uncommon to utilize a home equity line of credit to consolidate debt in order to achieve a better interest rate. For example, a HELOC can be applied to a car loan or a credit card. Homeowners who take advantage of a HELOC to pay off debt will often have a good financial management plan in place to ensure those debts do not rack up again after using home equity to pay them off. Be sure to pay careful attention to your spending after using your home’s equity, and make sure the benefits outweigh the costs. If you play your cards right, a home equity line of credit can be an excellent way to secure lower interest rates, and save money in the long run.

Second Home

For those wondering how to use home equity to buy another house, the answer is simple: homeowners can use a home equity loan for a down payment on a new home. This option is common among homeowners who wish to downsize, as they can move into a smaller second home and use the original home to generate rental income. Homeowners may also use their home’s equity to fund a vacation home, which they can enjoy throughout the year, and rent out when it remains unoccupied.

Investment Property

In addition to funding the down payment of a second home, a home equity line of credit could also be used for the down payment of an investment property. It can be thought of no differently than using any other form of financing for an investment property; however, it does come with some risk. If you fail to make payments on the loan, it could put you at risk of losing both your primary residence and your investment property. Many homeowners avoid this by having strong savings outside of their home’s equity, and minding due diligence when searching for an investment property. If you are interested in utilizing a HELOC on a property other than your primary residence, be sure to check out other resources to learn how to use home equity as an investor.

what is home equity


Learning how to use home equity is a crucial step for any homeowner or investor preparing for retirement. Leveraging home equity gives homeowners the opportunity to pursue outlets ranging from an education in real estate investing to funding the down payment on a second home. If done correctly, tapping into your home’s equity can even help you achieve continued financial success throughout retirement.

Have you taken advantage of a home equity line of credit? Leave a comment and let us know how the opportunity contributed to your financial success.

Real Estate Financing
Real Estate Financing
Real Estate Financing
Real Estate Financing
Real Estate Financing