UNLOCKING YOUR HOME EQUITY
How to use the value of your home to support your senior years
Your home is more than where you live. For many Californians, it’s their largest financial asset. The right downsizing strategy can help you unlock cash flow, reduce monthly costs, and create flexibility for the years ahead, without making a rushed decision.
In this section, we’d like to lay out the most common ways homeowners 55+ use home equity, along with who each option fits best, the tradeoffs to watch, and when it’s smart to bring in a professional.
ASK FIRST
What do you need your home equity to do?
Before you choose a path, get clear on your primary goal.
Most people want more than one of these. The best plan is usually the one that balances cash flow, safety, and peace of mind.
Lower monthly expenses
Property taxes, insurance, maintenance, utilities
Increase retirement income
Steady cash flow
Free up a lump sum
Invest, buy a replacement home, fund care
Stay in the home longer
Age in place with support
Support family or legacy goals
Inheritance, helping children
Reduce stress and upkeep
Simplify daily life
Home Equity Options
HOME EQUITY OPTIONS
Sell and Downsize
Best for freeing up a lump sum and reducing ongoing costs
Why Choose This
- Turn equity into cash you can use for retirement planning
- Move to a home that better fits current needs (single level, less upkeep, closer to family)
- Potentially lower costs across the board
Watch Outs
- Timing the sale and purchase so you don’t feel pressured
- Emotional impact of leaving a longtime home
- Coordinating temporary housing or a rent-back if needed
Tax Benefits
California Advantage: Prop 19
If you’re 55+ and moving within California, you may be able to transfer your property tax base from your current primary residence to your replacement primary residence (up to three times), subject to timing and value rules
Tax Planning Basics
- If you owned and lived in the home 2 out of the last 5 years, you may exclude up to $250,000 in capital gains (single) or $500,000 (married filing jointly)
- If you expect to exceed the exclusion, document improvements and consult a CPA early
HOME EQUITY OPTIONS
Keep the Home and Rent It Out
Best for creating income while keeping the property
Why People Choose It
- Rental income can support retirement cash flow
- You keep ownership, which can matter for long-term plans and legacy goals
- You can downsize into a smaller rental or purchase separately
Watch Outs
- If you buy a replacement home, you generally won’t benefit from Prop 19 tax-base transfer unless you sell the original primary residence
- Taxes on rental income and later sale can get complex. A CPA can help you model outcomes.
The Reality Check
Being a landlord is a business:
- Tenant screening, maintenance, repairs
- Insurance and compliance requirements
- Vacancy risk and uneven cash flow
HOME EQUITY OPTIONS
Reverse mortgage (HECM)
Best for staying in the home while accessing equity
A reverse mortgage can convert part of your equity into cash without monthly mortgage payments. It may come as a lump sum, line of credit, or monthly payments. This option can be powerful in the right situation, but it requires careful comparison and counseling. Typical minimum age: 62+ (program dependent)
Why People Choose It
- Stay in the home longer
- Improve cash flow without selling
- Use funds for healthcare, in-home support, or living expenses
Watch Outs
- Fees and loan costs can be higher than other financing
- You must still pay property taxes, insurance, and upkeep
- The loan balance grows over time, which reduces remaining equity
HOME EQUITY OPTIONS
HELOC or Home Equity Loan
Best for short to medium term cash needs with a repayment plan
Why People Choose It
- Access equity without selling
- Useful for bridge financing (for example, buying your next home before selling)
- Flexible (HELOC) or predictable (fixed-rate home equity loan)
Watch Outs
- Monthly payments are required
- Variable rates (HELOC) can increase your payment over time
- Borrowing against the home adds risk if income is tight
HOME EQUITY OPTIONS
Co-Living or Family Solutions
Best for improving affordability and support without relying solely on debt
House Sharing
- Rent out a room or share housing costs with a roommate
- Can reduce loneliness and provide light support
Family Sale-Leaseback
- Sell the home to a family member and rent it back
- Provides liquidity while staying in place
Watch Outs
- These require very clear expectations and written agreements
- Talk to an attorney if family ownership, rent, or inheritance is involved
HOW TO CHOOSE
A Simple Decision Framework
STEP 1
What matters most
Decide what matters most to you. Choose your top 2 priorities from the list below:
- Cash now
- Cash flow monthly
- Staying put
- Lower taxes
- Less responsibility
- Protecting inheritance
STEP 2
Identify constraints
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- Health or mobility changes in the next 1–3 years?
- Is your current home expensive to maintain?
- Is your income steady enough for loan payments?
- How important is a predictable monthly budget?
STEP 3
Pressure-test your plan
A good plan still works when life isn’t perfect.
- What happens if home prices soften for a year?
- What happens if your care needs increase?
- What happens if a tenant doesn’t pay for 3 months?
- What happens if interest rates rise?
Consult Experts
Some of these choices are too expensive to “figure out later.”
CPA or Tax advisor
Capital gains, rental income, Prop 19 timing, withholding questions
Estate Planning Attorney
Trusts, inheritance, family ownership, updating documents after a sale
Reverse Mortgage Counselor
Required for many HECM loans, helpful for comparing alternatives
Real Estate Advisor
Pricing strategy, net sheet planning, coordinating timelines, and relocation logistics
Looking to Downsize?
Explore our guides and how we can help you.
Preparing for a Stress-free Move
Know the perfect time to get organized, and how to deal with the overwhelm and emotions of leaving behind a home.
Move within the Bay Area, US, or Abroad
Explore your options and see if moving within the Bay Area, USA, or abroad would suit your lifestyle best.
Unlocking your Home Equity
Explore different options on how to maximize the value of your home to support you next chapter in life.