How to Get Cash From Your Home Without Selling in California

Home Equity Loans and HELOCs: What Borrowing Against Your Home Looks Like

A home equity loan is a set amount of money borrowed against the home and paid out as a lump sum. According to the CFPB, it may have a fixed or adjustable rate. If the home already has a mortgage, the new loan is a second mortgage, with payments on top of the first.

A HELOC works more like a credit card that is backed by the house. The owner can borrow repeatedly, up to a limit, during a "draw period," and the CFPB notes that this period "could last 10 years, for example." The FTC explains that once the draw period ends, the owner can no longer borrow and must start repaying the balance. The CFPB adds that a HELOC's rate is usually variable, and that the lender might freeze the line if the home's value falls sharply or the owner's finances change.

A lender decides who can borrow and how much, based on income, credit and available equity. The trade is the monthly payment, and with both products the house itself secures the debt: a lender can foreclose if the loan is not repaid as agreed. The owner keeps title the whole time. When the loan uses the owner's main residence as collateral, the FTC describes a three-business-day right to cancel. That right does not apply to a vacation or second home.

Cash-Out Refinancing: What Happens When You Replace Your Mortgage

A cash-out refinance trades one mortgage for a bigger one. The new, larger mortgage pays off the old one, and the owner receives the difference in cash. This works best when the existing balance is low and the equity is substantial, because there is more room between the two loans.

The new mortgage has its own interest rate and its own term. The monthly payment usually changes, and often it goes up. The repayment clock also starts over. A homeowner who was close to paying off the house can end up with years of payments ahead and more total interest, with the house still standing behind the larger debt.

For an older homeowner on a fixed income, qualifying can be the hard part. A lender looks at income and credit to judge whether the new payment can be carried, the same way it would for any other mortgage. Refinancing is also on the list of alternatives the FTC says a HECM counselor must discuss.

Reverse Mortgages: No Monthly Payment, but the Balance Grows

What sets a reverse mortgage apart is that the borrower makes no monthly mortgage payments. As the CFPB puts it, the title stays in the owner's name, but "interest and fees are added to the loan balance each month and the balance grows." The borrower must use the home as a principal residence, pay the property taxes and homeowners insurance, and keep the house in good condition. The loan generally comes due when the last borrower dies, sells the home, or moves out. Under the CFPB's description, it can come due sooner if one of these obligations is not met.

The most common type is the Home Equity Conversion Mortgage (HECM). HUD describes it as the only reverse mortgage insured by the federal government, available only through an FHA-approved lender. Under 12 U.S.C. § 1715z-20(b)(1), an eligible homeowner is one "who is, or whose spouse is, at least 62 years of age or such higher age as the Secretary may prescribe." Section 1715z-20(d) of the same title also requires that the borrower first receive counseling from an independent third party. HUD's page links to its HECM Counselor Roster. According to HUD, the amount available depends on the age of the youngest borrower or eligible non-borrowing spouse, the current interest rate, and the home's value, subject to the HECM limit.

A few protections apply:

• Limited liability. The CFPB says that neither the borrower nor the heirs will have to pay back more than the home is worth.
• Fee limits. Federal rules limit the origination fee, allow it to be fully financed with the loan under 12 U.S.C. § 1715z-20(r), and the lender discloses the actual amount.
• California's rules. Civil Code section 1923.2 adds its own requirements. A lender must give the applicant a list of at least 10 HUD-approved counseling agencies. It cannot accept a final application or charge fees until seven days after counseling. It cannot require the applicant to buy an annuity.

A reverse mortgage is one option among several, and it trades part of the home's future equity for money now. The comparison of reverse mortgages and home equity loans sets out that difference side by side.

Home Equity Sharing Agreements: Selling a Piece of Future Value

A home equity sharing agreement is not a loan in the usual sense. A company pays the homeowner a lump sum today. In return, it receives a share of the home's future value, usually collected when the home is sold or when the agreement's term ends. There are no monthly payments.

The trade comes at the end. If the home rises in value, the company's share grows with it, and the owner keeps less of the sale proceeds or owes more at settlement. The terms differ from one agreement to the next, including how long the agreement runs, how the share is figured, and what happens if the owner wants to end it early. Because these points are set by each contract rather than by a single standard, the written agreement is the place to find them. A real estate attorney can review it before it is signed and explain what it means for this particular house.

Unlike a HECM, an equity sharing agreement has no minimum age of 62. That can matter to a couple where neither spouse has reached that age. The agreement still places a claim on the home that affects what the owner, or the family later, takes away from it.

The cost here is invisible month to month, but it shows up clearly when the home is eventually sold or the term ends.

Other Ways to Ease a Cash Shortfall Before Tapping Equity

Sometimes the need can be met without borrowing against the house at all. Even the federal law that governs counseling points this way. 12 U.S.C. § 1715z-20(f) requires the HECM counselor to discuss "options other than a home equity conversion mortgage," including "property tax deferral."

One starting place is benefits that have not yet been claimed. Some older Californians qualify for programs such as Social Security, SSI, Medi-Cal or local aid, and the CFPB points readers to benefitscheckup.org, noting that state and local programs can help with utilities and home repairs. Property taxes are another. California has property tax postponement and exemption programs for some older and lower-income homeowners; the State Controller's Office publishes the current postponement rules, and the county tax office can explain local relief.

Family can be part of the answer too. Some families arrange an informal loan or regular contributions, which avoids the costs of a formal product. And for some owners, selling or downsizing to a less expensive home or a rental frees up equity with no ongoing loan. The comparison of a reverse mortgage and selling walks through that choice.

How the Options Compare: What Each One Involves and What It Trades

Side by side, the differences come down to four questions: how the money arrives, whether a monthly payment is due, what is given up, and who can generally use the option.

The table is a reference for building a list of questions, not a ranking. All five categories are available in California, and state law adds protections such as Civil Code section 1923.2 for reverse mortgages. The CFPB, by phone at (855) 411-2372, can connect homeowners with a HUD-approved housing counseling agency. Broader overviews of ways to access equity in retirement and California home equity options for seniors cover the same ground from other angles.

Which option fits depends on the homeowner's own situation, goals and obligations. A HUD-approved housing counselor, a financial adviser or an attorney can help weigh that fit.