How to Get Money From a Paid-Off House in California

The Main Options for Accessing Your Home's Value

A short map helps before looking at any one path closely. Here are the main choices for a paid-off home, each in a sentence or two.

• Home equity loan. A loan paid out in one lump sum. It is repaid in fixed monthly payments over a set number of years.
• HELOC. A home equity line of credit, a revolving credit line. You draw money as you need it, up to a limit, and repay it over time.
• Cash-out refinance. A new mortgage on the home. It pays off any balance still owed, and you receive the rest as cash.
• Reverse mortgage. A loan for homeowners 62 or older that does not require monthly mortgage payments. Interest and charges are added to the balance instead, so the amount owed grows.
• Selling or downsizing. You sell the home and keep what remains after selling costs, then buy or rent a smaller place.
• A family loan or gift. A relative provides money, sometimes in return for a future share of the home.
• Property tax relief. State programs can lower or delay property taxes, which reduces how much money you need.

This is a map, not a ranking. Each option trades something different: a monthly payment, a growing balance, a move, or a family agreement. The CFPB's own list of other choices includes waiting, a home equity loan or line of credit, refinancing, downsizing and lowering expenses, according to Can anyone take out a reverse mortgage loan?.

The three borrowing options (a home equity loan, a HELOC and a cash-out refinance) share two features. The lender reviews credit, income and the home's appraised value before approving. And because the house secures the debt, missed payments can put the home at risk. The sections below focus on what sets each one apart.

Home Equity Loan: You Borrow a Lump Sum Against the House

A home equity loan works the way many people picture a loan. A lender gives you one lump sum. You pay it back in fixed monthly installments over a set term, such as a number of years. The home is the collateral. Collateral means property that secures a loan and that the lender can claim if the loan is not repaid.

Because your house is paid off, its whole value can stand behind the loan. Lenders generally do not lend the full value, though. They usually lend up to a set percentage of the appraised value. An appraisal is a professional estimate of what the home would sell for.

The monthly payment is the central point. Repayment starts soon after closing and continues every month for the term. The CFPB notes that these loans "usually have monthly payments" and "depend on your income and credit," in Considering a reverse mortgage? Proceed with caution. The same CFPB publication says a home equity loan or line of credit "might be a cheaper way to borrow cash against your equity."

Homeowners use these loans for repairs, medical bills or living costs.

In California, any business that makes or services residential mortgage loans generally needs a license under the California Residential Mortgage Lending Act. Banks are among the exempt groups, according to the California Department of Financial Protection and Innovation.

HELOC: A Flexible Credit Line Using the Home as Security

A HELOC gives you a credit line instead of a lump sum. That suits someone who does not need all the money at once. You draw what you need, up to a limit the lender sets. Interest is charged only on the amount you have actually drawn, not on the full limit.

A HELOC usually has two stages. During the draw period, you can borrow from the line, and the required payments are often smaller. When the draw period ends, the repayment period begins. You can no longer borrow, and you repay what you owe, often with larger payments than before.

HELOC interest rates are usually variable. That means the rate can go up or down, and the monthly payment can change with it. On a fixed income, a payment that rises without warning can strain a budget that once felt steady.

The same California licensing rules described above apply to the businesses that offer these lines.

A credit line can suit a situation where needs arrive one at a time rather than all at once.

Cash-Out Refinance: You Replace a Paid-Off Home With a New Mortgage

A cash-out refinance means taking out a brand-new mortgage on the home. Normally the new loan first pays off the old mortgage, and the borrower keeps the difference. On a paid-off home, there is nothing to pay off. So the loan amount, less closing costs, comes to you as cash.

The tradeoff is easy to state. You would again have a mortgage where none existed, with monthly payments required for the life of the loan. The interest rate and the length of the loan both shape the total cost. A longer term usually means smaller payments but more interest paid over the years.

For an older homeowner on a fixed income, a common consideration is whether a new monthly mortgage payment remains affordable over the years ahead. That includes years when health, costs or household income could change.

Reverse Mortgage: An Option Designed for Homeowners 62 and Older

A reverse mortgage lets an older homeowner borrow against the home without making monthly mortgage payments. That does not make it free. The CFPB explains that "interest and fees are added to the loan balance each month and the balance grows," in What is a reverse mortgage?. The borrower must keep living in the home as a principal residence, pay the property taxes and homeowners insurance, and keep the house in good condition. The loan comes due when the last borrower dies, sells the home or moves out. If those obligations are not met, the CFPB warns, a borrower "could face foreclosure."

The federally insured version is the Home Equity Conversion Mortgage, or HECM. HUD calls it "the only reverse mortgage insured by the U.S. Federal Government," available "only through a Federal Housing Administration (FHA)-approved lender," on its HECM program page. HUD says the amount available depends on the age of the youngest borrower or eligible non-borrowing spouse, the current interest rate, and the lesser of the appraised value, the HECM FHA mortgage limit or the sales price. HUD publishes the current limit.

Federal law sets eligibility rules, listed in 12 U.S.C. § 1715z-20(d). The borrower must have:

"received adequate counseling ... by an independent third party that is not, either directly or indirectly, associated with or compensated by a party involved in" originating or servicing the mortgage, funding it, or selling annuities, investments or insurance.

The same subsection lets the borrower choose how payments come. The choices are a line of credit, monthly payments over a chosen term, monthly payments over the borrower's tenure in the home, combinations of these with a line of credit, or "any other basis that the Secretary considers appropriate." Any payment is what a lender may pay under the loan's terms, and it depends on the borrower keeping up the loan's obligations. The law also says the homeowner is generally not liable for more than the home brings at sale. Federal rules limit the origination fee, and the lender discloses it.

In California, licensed real estate brokers, who hold a license from the California Department of Real Estate, are among those exempt from the state's mortgage lending license, according to the DFPI page cited earlier. Under the CFPB page, most reverse mortgages carry a three-business-day right to cancel after closing.

Not having a monthly mortgage payment changes the day-to-day picture, and the growing balance changes the longer-term one.

Other Ways to Use a Paid-Off Home's Value

Not every path involves a loan. Some turn the house into money directly. Others lower your costs so you need less money.

Selling and Downsizing

You sell, keep the proceeds after selling costs, and buy a smaller home or rent. No new debt is created. The cost is leaving a home that may hold decades of memories.

Renting a Room or an ADU

An accessory dwelling unit is a small second home on the same lot, such as a backyard cottage or a converted garage. Rent from a room or an ADU can add money each month without borrowing. State and local rules govern building and renting one, and the local planning office explains them.

A Family Loan or Gift

Some families arrange for an adult child to provide funds, sometimes in exchange for a future share of the home or the estate. These arrangements carry legal and tax questions, and an attorney and a tax professional are the people who can explain them for a given family.

Property Tax Relief

The homeowners' exemption reduces taxable value by $7,000 of the full value of an owner-occupied principal residence, under Revenue and Taxation Code section 218. The Board of Equalization says it requires a one-time filing with the county assessor. A first-time filer must file by February 15 to receive the full exemption for that year. The county assessor can also explain Proposition 19 base-year value transfers.

The State Controller's Property Tax Postponement Program lets eligible homeowners defer current-year taxes on a principal residence. Eligible homeowners are seniors, people who are blind, or people with a disability. Criteria include at least 40 percent equity, a requirement also written in Revenue and Taxation Code section 20583. The 2026-27 criteria also include annual household income of $57,002 or less, among other requirements. The fact sheet says postponed taxes must eventually be repaid and are secured by a lien. They accrue 5 percent simple interest per year. Funding is limited, and the home cannot have a reverse mortgage on it.

Some of these paths ask nothing of a lender and nothing of your credit history.

What to Think About Before Choosing an Option

The choice can feel heavy when the house is both your home and your savings. A few questions help sort the options without forcing a decision.

Monthly payments. A home equity loan, a HELOC and a cash-out refinance all require monthly payments. A reverse mortgage does not require monthly mortgage payments, but its balance grows, as described above.

Effect on heirs. Any loan secured by the home reduces what is left for family later. A reverse mortgage balance that has grown for years may leave little equity. Selling captures the equity now, and nothing is owed afterward. Families thinking about a spouse's future may find more detail under options for a surviving spouse.

Credit and income. The borrowing options turn on the lender's credit and income review. A reverse mortgage has its own conditions. The CFPB says the borrower cannot owe federal debt, such as federal income taxes, though reverse mortgage money may be used to pay it. The home must meet property standards.

Independent help. For a HECM, counseling is required by the federal law quoted earlier. HUD's page lists a HECM Counselor Roster and the number (800) 569-4287. Under 12 U.S.C. § 1715z-20(f), counselors must discuss options other than a HECM. A HUD-approved housing counselor or an adviser not tied to a lender can help compare any of these paths. Retirees weighing these choices can also read about being retired with a paid-off house.