Aging is inevitable. It’s also very expensive.
At some point in our lives, seven out of ten of us will need long-term care. And costs for it are high, rising faster than inflation overall. The annual price tag to stay in a nursing home currently tops more than $100,000 a year, according to Genworth and CareScout’s 2024 Cost of Care Survey. If you need a home health aide or caregiver services, like cooking and cleaning, get ready to fork over $75,000 a year for each.
Millions of seniors facing that sticker shock have a powerful asset at their fingertips: their home equity. About $14 trillion in housing wealth (about 40 percent of all the home equity in the U.S.) is held by homeowners 62 years of age and older, close to a record high, according to the National Reverse Mortgage Lenders Association (NRMLA). While many seniors don’t expect to tap into that wealth to pay for health care or other medical needs, they typically end up doing so. It may be their only option, in fact.
How can seniors effectively leverage their home equity in their later years? How can their ownership stake fit into a long-term care plan? Tapping home equity can be a smart move, but only if it’s planned, with the right method in mind.
Why you might need to tap home equity
Do you have a pension, receive Social Security benefits, or have money tucked aside in savings? If you do, the unfortunate reality is that these income sources may not be enough to cover the rising costs of assisted living or a nursing home – or even an aide to help around the house. “The cost of getting in-home care can be significant, even for those who have planned retirement as best as they could,” says Steve Irwin, president of the NRMLA.
“Less than one-third of Americans aged 50 plus have begun saving for long-term care. That’s because they either do not think they will need care or they mistakenly believe they are covered by Medicare or their health insurance policies,” says Jamala Arland, president and CEO of US Life Insurance, Genworth, a company that helps seniors navigate aging.
Many older Americans assume that Medicare will pay for their aging-in-place and long-term care. Unfortunately not. Medicare will cover home health assistance after a hospital stay and up to a 100-day stay in a skilled nursing facility, but it does not pay for longer stays in nursing homes or assisted living facilities. Nor does it cover caregivers.
Falling short on savings
Medicaid does cover long-term care for individuals – provided they meet strict income and asset requirements. According to the NRMLA, while more than half of older Americans say Medicaid will be a source of support, only a small percentage will actually be eligible. In 2025, single seniors who need to receive nursing home Medicaid can’t have an income in excess of around $2,901 a month (the actual amount varies depending on the state). For married couples applying, it’s $5,802.
What about the seniors who have or make “too much” money? They will be forced to spend down their income and assets in order to qualify. But if you think you can just gift large sums of money to other people or charities, or offload some or all of your assets (like your home), think again. In most states, Medicaid has a five-year look-back period for long-term care, in which it reviews all your financial transactions. Any large gifts or asset transfers within that time frame will swiftly put you on the denial list.
“It’s not that Medicaid is a terrible program,” says Mark Cohen, co-director of the LeadingAge LTSS Center at UMass Boston, which researches the challenges of the older population. “In fact, it’s a pretty darn good program in many states.” But the fact remains that, in order to receive Medicaid, seniors are put in the position of slowly having to bankrupt themselves, leaving their heirs with nothing when they pass away.
Even if they are able to jump through all of those Medicaid hoops, though, Cohen notes that there are certain services — in particular, home and community-based services — that may not be available because of long waiting lists.
Home equity to the rescue
That’s why home equity, the primary source of seniors’ wealth, is so critical. The most recent data from the Survey of Consumer Finances, as reported by the Urban Institute, shows the median home equity held by homeowners 65 years and older was $250,000 in 2022. And housing prices and property values have risen even higher since then. In February 2025, home price gains soared to the 19th all-time high in a row, carrying the worth of homeowners’ equity stakes with them.
“About fifty percent of our customers are using equity from their homes to pay for the cost of care. A lot of them don’t have an alternative,” says Arthur Bretschneider, CEO and founder of Seniorly, a marketplace for senior living facilities. “They’re the folks who have owned homes for many years and they’ve accumulated equity. That’s a blessing. They have it [equity] and now they have to use it.”
While many seniors don’t anticipate using homeownership stake to pay for care or other medical needs, they often end up doing so, a Center for Retirement Research at Boston College brief concluded. The brief analyzed a 2024 Greenwald Research survey, in which only one-third of the respondents, all seniors, said they’d use home equity for healthcare needs. It then focused on a RAND Health and Retirement Study, focusing on Medicare-covered individuals aged 65-plus, with over $100,000 in investable assets. The year they experienced a long-term healthcare “shock” (major cost), the value of their primary residence declined, implying they borrowed against it to finance the expense.
Ways to tap home equity for long-term care
There are a number of different ways you can tap into your home’s equity to pay for long-term home care. Each has advantages and disadvantages.
Reverse mortgages
A reverse mortgage is often the first home equity-tapping tool that comes to mind when you think about seniors and long-term care. After all, it’s geared specifically to them, as most of these loans are eligible only to those 62 years old and up (a few take folks as young as 55).
One of the benefits of a reverse mortgage is that you don’t have to make monthly payments. While the loan doesn’t require repayment while you are living, though, it must be paid back when the borrower dies or moves away. That means your heirs may be required to pay a large sum to keep the house.
Generally, you will need at least 50 percent equity in your home, and you have to live in it, so this wouldn’t be an option for retirees who want to transition to a senior living facility. A reverse mortgage can also impact your ability to qualify for programs like Medicaid. You will be required to attend a Department of Housing and Urban Development-approved counseling session to make sure you understand what you are getting into.
Home equity loans and HELOCs
A home equity loan or home equity line of credit (HELOC) is a smart way for seniors to tap into their home equity to pay for long-term expenses. However, budgeting is very important because your house is on the line if you can’t keep up with the payments.
Home equity loans typically have fixed interest rates. That makes them easy to manage, as the monthly payments will be predictable. However, if more funds are needed, you will need to take out a new loan.
As for HELOCs, their flexibility in withdrawing funds makes them ideal for ongoing long-term costs or unexpected expenses. But monthly payments may vary, due to their variable interest rates, which can be difficult for a senior on a fixed income. Also, seniors on average have high debt-to-income ratios, which often makes it more difficult for them to get approved for HELOCs, according to research from the Urban Institute.
Cash-out refinances
For seniors looking for a lump sum of cash to pay for their long-term care, a cash-out refinance could be the answer. Refi rates are lower compared to home equity loans or HELOC. But still, in today’s environment, cash-out refis might not be the most cost-effective way to tap into your home equity.
Chances are, interest rates have risen since your first mortgage. According to Freddie Mac, more than half of baby boomers are paying off a mortgage below 4 percent. Also, you’re taking out a larger loan, and that means your monthly payment will increase. If you opt for a long term on the new mortgage, you will also be charged more interest overall, all of which can be a financial strain for seniors.
As with HELOCs, it might be tough to qualify, too. A 2023 Federal Reserve Bank of Philadelphia working paper found that getting approved for a mortgage becomes more difficult as people age.
Selling the home
A home sale is the most time-honored way to convert your equity to cash. And the most profitable: The housing market has appreciated annually each quarter since 2012, giving seniors the potential to walk away from a home sale with a tidy sum. If you still have a mortgage, selling the house can eliminate monthly mortgage payments, freeing up funds for long-term care. The proceeds can be used to buy a smaller, more manageable house or move into an assisted living facility.
However, depending on your location, finding your next home may be costly or competitive. Selling a home and receiving a large sum may also impact your eligibility for Medicaid and other government programs.
Learn more: Home equity strategies for older homeowners
How seniors can use home equity
Home equity funds can be used for just about anything. While some seniors may need the extra funds to pay for long-term care outside the home, others may need it to manage their day-to-day lives while still living at home. Some common uses include:
- Aging-in-place modifications for the home: installing handrails or ramps, walk-in showers, non-slip flooring, ground-floor suites, stair lifts or other expensive renovations that make life easier for an elderly person. You may be able to deduct the interest on your home equity loan or HELOC if you use the funds to substantially improve the home’s habitability in this way. Also, these modifications increase your home’s value when done well.
- To pay out-of-pocket medical expenses that aren’t covered by your primary insurance or Medicare: certain drugs or treatments, or a caregiver’s wages.
- Funds to meet the monthly expenses of a nursing home or assisted living facility, or to make a down payment on a home within a senior community.
- To consolidate high-interest debt, like outstanding credit card balances. Home equity loan interest rates tend to be lower than those on credit cards. This strategy would free up a senior’s cash flow.
Is using home equity for long-term care a good idea?
Your home isn’t just a place to live; it’s a financial asset that can provide security when you need it most. However, depending on which option you choose, there are risks and drawbacks to using your home equity. You could face foreclosure if you can’t keep up with the monthly bills (especially with HELOCs, whose interest rates fluctuate). You could be depriving your heirs: tapping home equity dilutes your ownership stake, and they’ll be saddled with paying off the debt when they inherit.
Plus, going into debt to handle ongoing, everyday expenses is rarely a good strategy. If that’s what you need the equity funds for, be aware it’ll be a stopgap solution at best.
Still, for seniors who “might be asset-rich, but cash-flow-poor,” it’s a solution, Bretschneider says. “Frankly, you’ve earned the equity you’ve built up. Why would you not think about using it for the next phase of your life, or at least part of it, to age well and have a good outcome?”
He speaks from personal experience. In 2024, Bretschneider’s 73-year-old father was deciding about the next phase in his life. He had lived alone in a 3,000-square-foot home in California since his wife died in 2018. He had very little savings and was burdened by high utility and homeowners insurance costs. After looking at various options, including a home equity loan and a reverse mortgage, he ultimately decided to move into a senior living community. His house, which is worth about seven figures, is being renovated and will eventually be sold. After the sale, Bretschneider and his sister will invest the proceeds to fund their father’s ongoing care.
Bretschneider is right. While you can’t always predict the outcome, you can always prepare. My elderly mother, who died in 2022, never had a long-term care plan in place. But my husband and I have owned our home for over 20 years. While we have retirement savings and other assets, I am grateful we also have the equity in our home to fall back on in case we ever need it. It could work for you, too — but whatever safety net you choose, make sure you have started to weave it well before your elder years arrive.
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