California Home Equity Options for Seniors

Starting with the Basics: Budget, Benefits, and Property Tax Relief

Before borrowing against a home, it often helps to ask a smaller question: can the monthly gap be closed without a loan? A careful look at the household budget, and at public benefits the household may not be using, is a common first step. The Consumer Financial Protection Bureau notes that state and local programs can help with utilities, home repairs and property taxes, and it points to benefitscheckup.org for more information.

Property Tax Postponement. California's State Controller's Office runs a program that lets eligible homeowners put off paying current-year property taxes on their principal residence. The State Controller's Property Tax Postponement page says it is for homeowners who are seniors, blind or disabled. They must meet certain criteria, among other requirements. These include at least 40 percent equity and, for the 2026-27 program, an annual household income of $57,002 or less. The 40 percent equity rule also appears in Revenue and Taxation Code section 20583, which requires it to be met each time a claim is filed.

The postponed taxes are not forgiven. The program fact sheet explains several conditions:

• A lien, which is a legal claim against the home, secures repayment.
• Interest is 5 percent per year, simple interest, until the full amount is repaid.
• Funding is limited and given first come, first served, so not everyone who qualifies may be approved.
• An applicant must be at least 62, blind or disabled.
• The property must not have a reverse mortgage on it.

Other tax rules. The Homeowners' Exemption lowers a qualifying owner-occupied home's taxable value by $7,000, under Revenue and Taxation Code section 218. The Board of Equalization says a first-time filer must file with the county assessor by February 15 to receive the full exemption for that year. California's Proposition 19 also lets older homeowners who meet its conditions carry their existing assessed value to a replacement home. The Board of Equalization and county assessors publish its current rules.

Family help and selling. Some families choose a gift, a family loan or shared living. Selling or downsizing releases the full equity. It also brings moving costs and sale costs, and it means leaving the home.

For some households, a benefit or a tax program already on the books can ease the pressure without touching the home's equity at all.

Borrowing Against the Home: Equity Loans and Lines of Credit (HELOCs)

These two options are ordinary borrowing. The home stands behind the debt, and a payment is due every month.

A home equity loan pays one lump sum, secured by the home. It is repaid in fixed monthly installments over a set term. Interest runs on the full amount from the start.

A home equity line of credit, or HELOC, works more like a credit card tied to the house. The borrower draws money as needed, up to a limit. Interest runs only on what has been drawn. The balance falls as it is paid down, which is a key difference covered in the comparison of a reverse mortgage vs HELOC.

Both carry regular monthly payments. Missed payments can put the home at risk.

Can someone in their seventies get one? In its guide to reverse mortgage alternatives, the CFPB says that home equity loans and lines of credit also depend on your income and credit. A fixed or limited income can shape what a lender will approve.

The same CFPB publication says a home equity loan or line of credit "might be a cheaper way to borrow cash against your equity," but that these loans carry their own risks and usually have monthly payments. For a retiree, the question is whether a fixed income can carry one more bill for years.

The monthly cost depends on three things: the amount borrowed, the interest rate and the length of the term. A lender discloses each one before closing. In California, the Department of Financial Protection and Innovation is the state agency that licenses many mortgage lenders.

Cash-Out Refinancing

A cash-out refinance replaces the mortgage a homeowner already has with a new, larger one. The borrower receives the difference in cash.

That new loan comes with new terms, a new interest rate and, typically, a new monthly payment. The repayment clock also starts over. A homeowner who was a few years from paying off the house may find that payoff decades away again.

The trade is plain. The borrower gets a lump sum. In return, the monthly payment may be higher than before, and the debt lasts longer. This option tends to work only where steady income can support the new payment for the full term. Interest rates and fees vary, and the lender discloses them before closing.

A cash-out refinance can feel like a fresh start, but the debt and the monthly obligation start over too.

Reverse Mortgages: What They Really Involve

A reverse mortgage is the option families most often hear advertised, and the one most often misunderstood. It is a loan secured by the home. It lets an eligible homeowner draw on equity without making monthly mortgage payments.

Not having a monthly payment is not the same as having no cost. Four points belong together:

• The balance grows. The CFPB says that interest and fees are added to the loan balance each month, so the amount owed grows over time.
• The home stays the principal residence. The borrower must keep living there as a principal residence.
• Ongoing costs continue. The borrower must pay property taxes and homeowners insurance and keep the house in good condition. The CFPB warns that running out of money for these costs can lead to foreclosure.
• The loan comes due. A HECM must be paid off when the last surviving borrower or Eligible Non-Borrowing Spouse dies, sells or moves out. A spouse who qualifies under HUD's rules may be able to stay after the borrower dies. A stay of more than 12 consecutive months in a care facility, with no co-borrower at home, can also end the arrangement.

The federal program. The Home Equity Conversion Mortgage, or HECM, is the only reverse mortgage insured by the federal government. It is available only through an FHA-approved lender. Its basis is 12 U.S.C. § 1715z-20. Under 12 U.S.C. § 1715z-20(b)(1), the homeowner, or the homeowner's spouse, must be at least 62, or any higher age HUD sets. HUD says the amount available depends on several factors. These are the age of the youngest borrower or eligible non-borrowing spouse, the current interest rate, and the lowest of the appraised value, the FHA limit or the sales price.

Counseling and protections. Before anyone signs, the law builds in time to slow down and ask questions. At the federal level, 12 U.S.C. § 1715z-20(d)(2)(B) requires counseling by an independent third party before the loan. California layers on its own steps. Under Civil Code section 1923.5, a lender cannot take a reverse mortgage application unless, before counseling, the applicant has received a notice in 16-point type or larger stating that "a reverse mortgage is a complex financial transaction." Civil Code section 1923.2 then gives the homeowner a pause: a lender cannot accept a final application, or charge fees, until seven days after counseling. Federal law also limits the origination fee and requires disclosure of all costs, and the lender discloses the fee itself. One more protection matters to many families: under 12 U.S.C. § 1715z-20(d)(7), the homeowner is not liable for any shortfall between the debt and what the home sells for.

Payment options. Under 12 U.S.C. § 1715z-20(d)(9), payments may come in several ways, all subject to the loan's terms:

• a line of credit
• monthly payments for a set term
• monthly payments for as long as the borrower lives in the home
• either kind of monthly payment combined with a line of credit
• any other method HUD approves

The CFPB also describes a lump sum. Its payment options page notes that a lump sum may leave less money available. More background appears in what is a reverse mortgage.

A reverse mortgage is a loan, not income or a government benefit. The CFPB calls it "an expensive way to cover short term cash needs" when a move may come soon.

What Each Option Gives and What It Costs

Seeing the options next to each other can make the trade-offs clearer. The table below sets out what each one gives, what it costs and what it requires afterward.

The right fit for any household depends on its own facts. Income, equity, age, health, family plans and goals all shape which options are worth a closer look. These options can also overlap. A homeowner with a reverse mortgage, for example, cannot use the tax postponement program.

Next Steps: Where to Learn More and Who to Talk To

After reading all of this, a family is often left with one question: who can look at our situation? A few kinds of help exist, each for a different part of the decision.

A HUD-approved housing counselor is independent of any lender and is required before a HECM. HUD's HECM program page points to its HECM Counselor Roster and the phone line (800) 569-4287. Under 12 U.S.C. § 1715z-20(f), counseling covers several topics, including:

• options other than a reverse mortgage
• the financial implications of the loan
• possible tax, benefits and estate effects

Several other sources can help with the rest of the decision. The State Controller's Office publishes current Property Tax Postponement rules and forms. The Department of Financial Protection and Innovation can be asked about a California lender's license. A tax professional, a licensed financial adviser or an attorney can explain how a choice fits a household's own taxes, budget or estate. For a fuller look at the state's rules, the California reverse mortgage guide walks through each step.