Retired With No Savings but Own a House

Check Benefits First, Before the House Enters the Picture

Before borrowing anything, it helps to see the whole income picture. Some needs can be met without touching the house, and knowing that first can prevent borrowing that was never necessary.

Social Security retirement benefits are the monthly payments earned through years of work. For a retiree with little savings, they are often the base everything else rests on. The Social Security Administration sets the amount for each person based on their own work record.

Supplemental Security Income (SSI) is a separate federal program for people with limited income and resources. A "resource" means something you own that the program counts, such as cash in the bank. Here owning a home matters in a good way. Under 42 U.S.C. § 1382b(a)(1), in determining a person's resources, "there shall be excluded— (1) the home (including the land that appertains thereto)." In plain words, the house you live in generally does not count against you when SSI looks at what you own. The Social Security Administration decides who qualifies and publishes the current rules.

Medicare Savings Programs can help pay Medicare premiums and, for some people, deductibles and copayments. According to Medicare.gov, you apply through your state, income and resources generally must be below certain limits, those limits go up each year, and some states count less income or fewer resources than the federal limits.

Property tax relief and other local help is another place to look. The Consumer Financial Protection Bureau notes that state and local programs can help with utilities, fuel and home repairs, that many localities have programs to help with property taxes, and that the county or town tax office is the place to ask. The same page points to benefitscheckup.org for information about these and other benefit programs. Rules and amounts vary by state and county, so the local assessor or tax office has the current details.

Finding help that does not touch the home at all can matter more than any borrowing decision.

Ways to Get Cash From the Home While You Stay In It

Once the budget is clear, the next question is whether the house can supply cash while you keep living in it. Four kinds of loans do this. Each is shown here as a category, not ranked.

Home equity loan. A lender gives you one lump sum, secured by the home. You repay it in fixed monthly installments, and the lender looks at your income and credit before approving it.

Home equity line of credit (HELOC). This is a revolving line of credit, also secured by the home. You draw money as needed up to a limit, make monthly payments, and qualify based on income and credit. A side-by-side look at a reverse mortgage vs HELOC shows how differently the two balances behave.

Cash-out refinance. You replace your current mortgage with a new, larger one and receive the difference in cash. This creates a new monthly payment, and the borrower has to qualify for the new loan. If the house is already paid off, the new loan is simply a fresh mortgage; borrowing against a paid-off house works this way.

The CFPB notes that 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," and qualifying "depends on your income and credit." On a fixed income, that monthly payment is the central question.

Reverse mortgage (HECM). A Home Equity Conversion Mortgage is a federally insured loan for homeowners 62 and older that lets you draw on equity with no required monthly mortgage payment. Interest and charges are added to the balance, so the amount owed grows over time. The loan requires the borrower to keep living in the home as a principal residence, pay property taxes and homeowners insurance, and keep the home in good condition. The loan comes due when the last borrower dies, sells or moves out. The HECM section below explains it in detail.

Every option here has requirements set by lenders or by federal rules. Your own facts decide which ones are open to you.

Each of these paths lets you stay in the home, but each one asks something different of you in return.

Selling or Downsizing: When Moving Forward Makes Sense

Selling is a real option, not a failure. It turns illiquid equity into liquid money that can pay for retirement directly, with no loan to repay afterward.

Taxes are a common worry here. Federal law lets a homeowner exclude some or all of the gain on the sale of a principal residence from income tax, if ownership and use requirements are met (26 U.S.C. § 121). The IRS publishes the current dollar limits. Two special rules in that section matter for older homeowners. A widow or widower who sells may count the time the late spouse owned and used the home before death (26 U.S.C. § 121(d)(2)). And a person who becomes "physically or mentally incapable of self-care," and who lived in the home as a principal residence for periods adding up to at least 1 year during the 5-year period the law measures, is treated as still living there while residing in a state-licensed care facility, including a nursing home (26 U.S.C. § 121(d)(7)). A tax professional can say how these rules apply to a particular sale.

Downsizing means moving to a smaller or less costly home. It can free some equity while lowering ongoing costs such as property taxes, upkeep and utilities. The CFPB's reverse mortgage guide lists selling and moving to a more affordable home among the alternatives to consider.

The tradeoffs are real. Selling means leaving the house. Renting afterward brings a monthly housing cost that builds no equity. And the decision reaches past money: neighbors, memories, a garden, being near family or a doctor. Those count too.

For some families, selling is the choice that brings the most peace of mind, not the one that signals defeat.

The HECM Reverse Mortgage: How It Works and What It Requires

For a homeowner who wants to stay put and cannot carry a new monthly payment, the reverse mortgage is the option that usually raises the most questions. Here is how the federal program works.

A Home Equity Conversion Mortgage (HECM) is the reverse mortgage insured by the Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD). HUD states it is the only reverse mortgage insured by the federal government and is available only through an FHA-approved lender. The title to the home stays in your name.

Eligibility. Under 12 U.S.C. § 1715z-20(d), an insured HECM must, among other things, be made by a lender the HUD Secretary approves, to a borrower who qualifies as an elderly homeowner, has received independent counseling and full disclosure of costs, and meets HUD's other requirements; it must also be secured by a 1- to 4-family home in which the borrower lives in one unit. The CFPB adds that borrowers must be 62 or older, live in the home most of the year, own it outright or be able to pay off any remaining mortgage at closing, owe no federal debt (though loan money may pay it off), keep the home in good shape, and have funds, or agree to set aside loan funds, for property taxes, insurance and upkeep.

Counseling is required. The statute calls for counseling by an independent third party not tied to the lender or to sellers of annuities, investments or insurance. HUD's page says to search the HECM Counselor Roster or call (800) 569-4287.

How money can be paid. The statute lists a line of credit, monthly payments for a set term, monthly payments for as long as you live in the home, combinations of these with a line of credit, or any other basis HUD considers appropriate. The CFPB describes a fixed-rate lump sum as well. Any payment is what a lender may pay under the loan's terms. The amount available depends on the youngest borrower's or eligible spouse's age, the interest rate and the home's value.

Costs. Federal rules limit the origination fee, and it is among the costs the lender must disclose. The loan carries federal mortgage insurance, and interest accrues. The lender discloses the actual amounts.

What the borrower owes. Interest and charges are added to the balance each month, so the amount owed grows and equity shrinks. HECM borrowers are required to live in the home as their principal residence, pay property taxes and homeowners insurance, and keep the home in good repair. The CFPB warns that falling behind on taxes, insurance or other housing costs could lead to foreclosure. The loan comes due when the last borrower, co-borrower or eligible spouse dies, sells or moves out. Under the statute, neither you nor your heirs owe more than the home brings when sold. The basics of how a reverse mortgage works go further on each step.

Understanding exactly what the loan requires, and what it costs over time, is what makes this decision yours to make clearly.

Help From Family and Other Paths Worth Knowing

The house is not the only resource. Family and community can ease some of the pressure on home equity.

Renting space. A homeowner with an empty bedroom, or a separate unit on the property, may earn rental income without selling or borrowing. This brings legal questions of its own: local zoning rules, a written lease, and what a landlord owes a tenant. A local attorney can explain how those rules apply.

Family support. Adult children or other relatives sometimes help pay a parent's property taxes, insurance or living costs. Some families write down who pays what and how it is treated later, especially when there are several siblings.

Local aging services. An Area Agency on Aging is a local office that connects older adults and caregivers with services such as meals, rides and help around the house. Your city or county government can point you to the one that serves your area.

Repair and accessibility help. The CFPB notes that state and local programs may help with home repairs and utilities and may help defer property taxes. A local aging agency or a HUD-approved housing counselor can say what is currently offered.

Sometimes the pressure on the home eases when the full picture of support around it comes into view.

What to Think Through Before Making a Decision

There is no single right answer here, only questions that sort the options. These are the ones that tend to matter.

How long do you plan to stay? The CFPB cautions that if a health issue or another event may mean moving out soon, a reverse mortgage is an expensive way to cover short-term cash needs. A long stay and a short one point toward different tools.

What is the money for? A steady gap each month is a different need from one large bill. Some options pay out over time; others pay a lump sum.

What comes with it? A home equity loan, HELOC or refinance brings monthly payments. A reverse mortgage brings residency, tax, insurance and upkeep duties and a balance that grows. Selling brings a move.

What about heirs? Some choices reduce what passes to children; others leave the home intact. An estate planning attorney can explain how a choice fits a family's wishes.

Who can look at the whole picture? A HUD-approved housing counselor can review your situation, and the CFPB notes that counseling covers eligibility, the loan's financial effects and alternatives. Counseling is required before a HECM, and counselors help with other housing questions too. The FTC also notes that you do not have to buy any other financial product, such as an annuity, to get a reverse mortgage.