What are the ways to get cash out of your home's equity, and how do they differ?

Summary

There are five main routes: a home equity loan, a HELOC, a cash-out refinance, a home equity investment, and, for homeowners 62 or older, a reverse mortgage. They split along two lines. The first is whether your current mortgage stays in place or gets replaced. The second is whether you repay month by month or settle everything at the end.

Does your current mortgage stay?

A home equity loan and a HELOC leave the first mortgage alone and add a second loan behind it. With the loan you get the money in one lump sum and repay it in regular monthly payments, usually at a fixed rate. With the HELOC you draw what you need during a draw period, which the CFPB gives as 10 years in its example, and then repay over a period of often 10 or 20 years, when payments are "often significantly higher." Most HELOCs carry a variable rate.

A home equity investment also leaves the first mortgage in place, though the company records its own lien on the house.

A cash-out refinance does the opposite. In the CFPB's words, "you replace your existing mortgage with a bigger mortgage and take the difference in cash." That means the new rate applies to the whole balance, not only the cash. The CFPB says to consider the rate carefully "especially if it is higher than the interest rate on your current mortgage," and notes that you often pay closing costs. The cash-out refinance guide compares it with a home equity loan in detail.

Do you pay every month?

The loan, the HELOC and the refinance all come with a monthly bill. The other two don't.

With a home equity investment, you get cash now and settle in one payment when you sell or the term ends, and the amount depends on the value of the house at that point. The HEI explainer works through how that settlement is calculated.

With a reverse mortgage, "borrowers don't make monthly mortgage payments," but "Interest and fees are added to the loan balance each month and the balance grows." The loan is repaid when the borrower no longer lives in the home, usually by selling it.

The reverse mortgage rules, for 62 and older

The common version is the Home Equity Conversion Mortgage, or HECM. HUD calls it the only reverse mortgage insured by the federal government, and it is available only through lenders approved by the Federal Housing Administration. The CFPB lists the conditions. You must be 62 or older, live in the home most of the year, own it outright or have a low mortgage balance, and owe no federal debt such as income taxes or student loans. You must also meet with a HUD-approved counseling agency before you can get one. After closing, you still pay property taxes and homeowners insurance and keep the house in good repair.

HUD publishes the costs:

An initial mortgage insurance premium of 2% at closing, then 0.5% of the outstanding balance every year.
An origination fee of the greater of $2,500 or 2% of the first $200,000 of the home's value plus 1% of the amount above that, capped at $6,000.
For cases started in 2026, a maximum home value of $1,249,125 used to figure how much you can borrow.

The money can come as a line of credit, monthly payments for a set number of years or for as long as the reverse mortgage stays in place, or a lump sum. HUD says a fixed-rate HECM pays out only as a single lump sum. How much you can get depends on the youngest borrower's age, the interest rate and the home's value.

Borrowing without the house

The CFPB also points to a personal line of credit and credit cards, which don't put the home on the line. The trade-off, in its words, is that credit limits "may be lower and interest rates may be higher" on the line of credit, and that regular card rates "are typically higher than for options that use your home as collateral." The personal loan guide sets a home equity loan against an unsecured one.

Sources

Written by Kaz (pen name). Figures are copied from providers' published pages on the dates shown. We have not used these products. Corrections: contact form.