Retirees and HELOCs: What to know now
Financial flexibility is a key concern for most adults, but it is crucial for seniors and retirees who are no longer in the workforce. For these adults, there's often little room in their budget for errors or overspending, especially in recent months as stock market uncertainty impacted their retirement savings and 401(k) plans. And with inflation still a concern, if significantly cooled, and higher interest rates seemingly here to stay for the foreseeable future, concerns over money and the ability to pay for emergencies or unexpected expenses become more pronounced.
Fortunately, for retired homeowners, there's still a relatively inexpensive option to choose from now: a home equity line of credit (HELOC). With the average home equity amount over $300,000 currently, borrowing from it with a HELOC in the same way you'd use a credit card can be advantageous for retirees living on a limited income. Still, it does mean borrowing money, and that will come with some timely concerns that should be addressed before getting started. Below, we'll break down three HELOC items that retirees should consider right now.
Start by seeing how much you could borrow with a HELOC here.
Retirees and HELOCs: What to know now
Here are three things retirees considering borrowing with a HELOC should know now:
Rates are low (but hard to predict)
HELOC interest rates, not accounting for some upticks in recent weeks, have largely been on a steady decline since early 2024. At that point, they were around 10.16%, but now they're just 8.14%. Already in 2025, HELOC rates have fallen to 18-month and two-year lows, respectively. And they could fall further for borrowers in the weeks and months ahead, thanks to a variable rate structure that benefits borrowers in a cooling rate climate. Homeowners won't need to refinance their HELOC (or pay to refinance their HELOC) either, as it will adjust monthly.
Still, rates here are hard to predict. If the Federal Reserve keeps its federal funds rate intact, rates could remain static or even rise, but a series of factors, both known and unknown, could cause HELOC rates to rise, too, making repayment more difficult. So it's important to calculate costs based on today's rates and what they can realistically be in the future to better determine long-term affordability.
See what HELOC rate you'd qualify for now.
It can function as a useful emergency fund
Unlike a home equity loan, which will mandate immediate payments, a HELOC will only require borrowers to pay the interest on the amount of money borrowed during the draw period. And that could last for 10 years. If they don't borrow any money, meanwhile, and just keep the line of credit as backup for use as an emergency fund, they won't have to pay anything more than closing costs and, possibly, maintenance fees. With the need for an emergency fund more pronounced when retired, and especially pronounced considering recent market fluctuations, a HELOC can be particularly useful in today's economy.
Alternative borrowing sources are more expensive
In a different economy, credit cards, personal loans and home equity loans may all be cheaper and more effective for homeowners. But this isn't that economy. Credit card interest rates are just slightly below a record 23%, while personal loan rates are close to 13% and home equity loan rates are higher than HELOCs with less of the flexibility that the latter comes with. So, measure your alternatives carefully, but don't be surprised when you find out that most are more expensive now, essentially eliminating them as viable options for retirees in today's economy.
The bottom line
Retirees in the unique economic atmosphere of 2025 will need to take a strategic approach to their finances, particularly if they're considering borrowing from their home equity. Failure to repay in these instances could result in foreclosure. That's less of a concern, however, with a HELOC thanks to a low rate that's materially cheaper than alternative borrowing sources. With the ability to effectively function as a useful emergency fund now, as well, retirees may discover that a HELOC is one of their better borrowing options right now.
