You've been paying your mortgage for years. Maybe decades. And if your home has gone up in value — which most homes in South Florida and across the country have — you've built up something real: home equity.
Equity is the portion of your home you truly own. It's the difference between what your house is worth today and what you still owe on your mortgage.
For example:
Home Value: $400,000 − Amount Owed: $150,000 = Your Equity: $250,000
That $250,000 doesn't just sit there. With the right guidance, it can become retirement income, cover a major home repair, pay off high-interest debt, or fund a family expense — without you having to sell your home.
But here's the thing: how you access that equity matters. The wrong option for your situation could cost you more than you expect — or put your home at risk.
At Housing Foundation of America, Inc., our HUD-approved housing counselors help homeowners like you understand all the options clearly, without pressure, before you make any decisions. This post breaks down the three most common home equity options so you can enter any lender conversation fully informed.
💡 What Is Home Equity?
Your home equity is simple:
Home's Current Market Value − Amount Still Owed on Mortgage = Your Home Equity
The three options below all let you access that equity — but each works differently, comes with different costs, and is suited for a different type of homeowner.
🔄 Option 1: The Reverse Mortgage
What Is It?
A reverse mortgage flips the traditional mortgage model. Instead of you making payments to a lender, the lender makes payments to you. You convert a portion of your home equity into cash — and as long as you continue living in the home, you are not required to make monthly mortgage payments.
The most common type is the Home Equity Conversion Mortgage (HECM), which is backed by the federal government through HUD.
Who Qualifies?
✔️ Must be age 62 or older (some private lenders allow 55+)
✔️ The home must be your primary residence
✔️ You must have at least 50% equity in the property
✔️ No minimum income or credit score requirement for HECM
✔️ HUD counseling is required before you can proceed — this is where we come in
As of 2025, the maximum HECM loan amount is $1,249,125.
How Does It Work?
You keep the title to your home. You can receive funds as a lump sum, monthly payments, or a line of credit. Interest accrues over time, so your loan balance grows and your equity decreases. The loan becomes due when you:
- Sell the home
- Move out and no longer use it as your primary residence
- Pass away (heirs typically have 6–12 months to settle the loan)
Advantages:
✔️ No monthly mortgage payments required
✔️ You keep the title and stay in your home
✔️ Flexible payout options: lump sum, monthly payments, or credit line
✔️ No income or credit score minimums for HECM
✔️ Does not affect Social Security or Medicare benefits
Considerations:
⚠️ Equity decreases over time as interest compounds
⚠️ Higher upfront costs: origination fees, mortgage insurance premium, and closing costs
⚠️ Restricted to homeowners age 62 or older
⚠️ May impact Medicaid eligibility if proceeds are not properly managed
⚠️ Less equity remaining for heirs upon sale of the home
🏦 Option 2: The Home Equity Loan
What Is It?
A home equity loan — sometimes called a second mortgage — allows homeowners to borrow a one-time lump sum against the equity they have built in their home. You receive all of the money upfront and repay it in fixed monthly installments at a fixed interest rate.
Who Qualifies?
✔️ Any age — no age restriction
✔️ Credit score of 680 or higher typically required
✔️ Verifiable income required
✔️ Must have 15–20% equity remaining in the home after the loan
✔️ Your home serves as collateral
How Does It Work?
You receive the full loan amount at closing and begin repaying it immediately. Loan terms typically range from 5 to 30 years. Closing costs generally run 2–5% of the loan amount.
Advantages:
✔️ Fixed interest rate — your payment never changes
✔️ Lower rates than most personal or unsecured loans
✔️ No age restriction — available to all qualifying homeowners
✔️ Interest may be tax-deductible if used for home improvements (consult a tax advisor)
✔️ Ideal for one-time, known large expenses
Considerations:
⚠️ Monthly payments begin immediately — requires steady income
⚠️ Home is collateral; missed payments put your home at risk of foreclosure
⚠️ Closing costs of 2–5% of the loan amount
⚠️ No flexibility — full amount disbursed whether you need it all or not
⚠️ Credit score of 680 or higher typically required
💳 Option 3: The HELOC (Home Equity Line of Credit)
What Is It?
A HELOC works like a credit card secured by your home equity. You are approved for a maximum credit limit and can borrow from it — and repay it — as often as you need during a set draw period. You only pay interest on the amount you actually use.
Who Qualifies?
✔️ Any age — no age restriction
✔️ Credit score of 680 or higher typically required
✔️ Verifiable income required
✔️ Must have 15–20% equity in the home
✔️ Credit limits typically range from $25,000 to $500,000
How Does It Work?
A HELOC has two phases:
Draw Period (typically 10 years): Borrow what you need. Pay interest only on funds used.
Repayment Period (typically 20 years): No more borrowing. Repay principal and interest.
Interest rates are usually variable, meaning they rise and fall with market conditions. HELOCs can close in as little as 5 business days — the fastest of all three options.
Advantages:
✔️ Maximum flexibility — borrow only what you need, when you need it
✔️ Interest charged only on funds you actually use
✔️ Fastest closing — sometimes in as little as 5 business days
✔️ Revolving credit: repay and borrow again during the draw period
✔️ No age restriction
Considerations:
⚠️ Variable rate — payments can increase as interest rates rise
⚠️ Requires steady income; can be harder for retirees to qualify
⚠️ Risk of overspending due to the revolving credit structure
⚠️ Home is collateral; missed payments put your home at risk of foreclosure
⚠️ Annual maintenance or inactivity fees may apply
🏡 Which Option Is Right for You?
There is no single correct answer — the right choice depends on your age, income, credit profile, how long you plan to stay in your home, and what you need the funds for.
Choose a Reverse Mortgage if:
You are age 62 or older, you want to stay in your home, you need retirement income or cash without making monthly payments, and you have significant equity built up.
Choose a Home Equity Loan if:
You have a specific large expense — a renovation, debt consolidation, medical costs — you know the exact amount you need, and you want predictable fixed payments.
Choose a HELOC if:
You need flexible ongoing access to funds over time, such as for tuition, a phased renovation, or business expenses, and you are comfortable with a variable interest rate.
Not sure which fits your situation? That is exactly what our HUD-approved counselors are here to help you figure out
📞 Talk to a HUD-Approved Housing Counselor
At Housing Foundation of America, Inc., we are a HUD-approved, non-profit housing counseling agency. We work for you to help you reach your financial & housing goals.
Our certified counselors can help you:
✔️ Understand the true costs and risks of each financing option
✔️ Determine whether a reverse mortgage is right for your situation
✔️ Review your eligibility for home equity loans and HELOCs
✔️ Identify down payment assistance and homeowner resources in your area
✔️ Connect with trusted lenders and avoid predatory practices
📞 Call: 954-923-5001
📧 Email: info@approvedbyhud.org
🌐 Visit: www.homeapproved.org
📲 Text: DAP to 85100 for down payment assistance alerts
📲 Download Our Home Search App
Get priority DPA alerts, view listings, and stay updated on homes that match your goals — available FREE on the App Store and Google Play!
Your home has worked hard for you. Let's make sure your equity works hard for you too. 🔑