Home equity is often the largest asset a retiree has, and there are three genuinely different ways to access it: sell and downsize, borrow against it with a reverse mortgage, or borrow against it with a home equity line of credit (HELOC). Each solves a different problem, and each has a real cost.
Downsizing: the debt-free option
Selling your current home and buying something smaller (or renting) converts equity directly into cash with no ongoing debt or interest. It's the option that frees up the most money outright, and it comes with no compounding balance to worry about later.
The cost isn't financial debt — it's transaction cost and disruption. Real estate commission, legal fees, moving costs, and — in BC — Property Transfer Tax on your next purchase all come off the proceeds. And it means leaving a home you may have real attachment to, on a timeline that suits the market as much as you.
Reverse mortgages: stay put, no monthly payments
A reverse mortgage lets homeowners 55 and older borrow against their equity — typically up to about 55% of the home's appraised value — as a lump sum, regular advances, or a line of credit, with no required monthly payments. The loan, plus accumulating interest, is repaid when you sell, move out, or pass away.
Qualification leans on your age and home equity rather than income, which makes it accessible on a fixed pension. The trade-off is cost: reverse mortgage interest rates typically run higher than a conventional mortgage or HELOC, and because there are no payments, the balance compounds — meaning the debt grows and the equity you'd leave to your estate shrinks over time.
HELOCs: usually cheaper, but you need the income to qualify
A home equity line of credit lets you borrow against your equity (typically up to about 65% of value) at a lower rate than a reverse mortgage, but you have to qualify based on income — including passing the mortgage stress test — and you're required to make at least interest payments monthly.
For a retiree with solid pension or investment income, a HELOC is often the cheaper way to access equity. For a retiree on a tighter fixed income, the monthly payment obligation can be the dealbreaker that pushes them toward a reverse mortgage or downsizing instead.
A simple way to think about the choice
- Want the most cash and no debt, and you're ready to move? Downsizing generally wins.
- Want to stay in your home and don't want a monthly payment? A reverse mortgage is built for exactly this, at a real long-term cost.
- Want to stay in your home, have the income to cover payments, and want the lowest rate? A HELOC is usually the cheaper borrowing option.
None of these is universally "right" — the correct choice depends on your income, how attached you are to your current home, your estate planning goals, and how you weigh cost against flexibility. A mortgage professional can model the actual numbers for your situation on the borrowing side; we can do the same for what your home would realistically sell for and what a downsized purchase would look like.
See our Retirement & Downsizing Homes collection for the kind of low-maintenance properties most downsizing buyers look for, or reach out to talk through your specific situation — there's no obligation, and sometimes the most useful outcome is confirming that staying put is the right call.