John and Mary are getting ready for retirement. They're thinking about selling their home, but it's not a good time to sell. They're also considering a reverse mortgage, but they've heard some scary stories. What's another option?
One option John and Mary might consider is tapping into their home equity for long-term planning.
Home Equity Uses For Long Term Planning: What Are Home Equity Uses?
Home equity uses can include taking out a home equity loan, which lets you borrow money using the equity in your home as collateral. Home equity loans and HELOCs typically allow homeowners to tap up to 80 or 85% of their home's value, minus their outstanding mortgage balance. The national average home equity loan interest rate is 8.10% as of August 12 - 2026, according to Bankrate's latest survey of the nation's largest home equity lenders.
When Can You Access Your Home Equity?
According to the FHFA, around 97 percent of outstanding first-lien, closed-end residential mortgages in the United States have home equity above 10 percent. The sum total of tappable equity - the amount that can be accessed while still leaving a 20 percent equity cushion - possessed by U.S. homeowners with mortgages is $11.6 trillion, according to the ICE Mortgage Technology August 2025 "Mortgage Monitor" report. So - for John and Mary, it's likely they can access some of their home equity for retirement planning.
Why Should You Care About Home Equity Uses?
Home equity is important because it represents the portion of your home that you own outright. According to the FHFA, only 0.2 percent of mortgages have negative equity, the lowest level in the past 10 years as of Q1 2023. This means that, for the vast majority of homeowners - there's money in the house that can be tapped for long-term planning.
How Does a Home Equity Loan Work?
A home equity loan allows you to borrow money using the equity in your home as collateral. The Home Equity Loan Consumer Protection Act requires creditors to provide certain disclosures for open-end credit plans secured by the consumer's dwelling. It also imposes substantive limitations on open-end credit plans secured by the consumer's dwelling.
If you can't pay back a home equity loan, the lender could foreclose on your home. You should carefully consider all your options before you borrow against your home to invest, as all investments can lose value and that could put your home at risk if you can't repay the loan later on.
What Are Some Potential Risks of Tapping Into Your Home Equity?
Tapping into your home equity can be risky. If you can't repay the loan, you could lose your home. And if you take out a home equity loan and then the value of your home drops, you could end up owing more than your home is worth.
Additionally - home equity loans may have upfront fees and costs. You'll want to shop around and compare terms from multiple lenders before you commit to a home equity loan.
What Are Some Advantages of Tapping Into Your Home Equity?
There are some potential advantages to tapping into your home equity, too. For example, the interest rates on home equity loans are often lower than those on credit cards or personal loans. And, if you use the funds to make improvements to your home, you may be able to deduct the interest payments from your taxes.
Conclusion
For John and Mary - tapping into their home equity might be a good option for retirement planning. They should carefully consider all their options before making a decision. And they should work with a trusted financial advisor to ensure they're making the best choice for their long-term goals.
In short, home equity uses can be a valuable tool for long-term planning. But it's important to understand the risks and benefits before you tap into your home equity.
References
- loans and HELOCs typically allow - bankrate.com
- 97 percent - fhfa.gov
- Equity Loan Consumer Protection Act - ftc.gov
- loans may have upfront fees - consumerfinance.gov
