Which type of mortgage allows homeowners to withdraw cash from their home equity?

A reverse mortgage is designed specifically to allow homeowners, particularly seniors, to convert part of their home equity into cash. This type of mortgage does not require homeowners to make monthly mortgage payments; instead, the loan balance increases over time as interest accrues on the amount borrowed. Borrowers typically receive these funds as a lump sum, monthly payments, or a line of credit, which can be particularly beneficial for retirees looking for additional income or to cover living expenses.

In contrast, a conventional mortgage, whether fixed-rate or adjustable-rate, requires the borrower to repay the loan in monthly installments. While these types of mortgages do not provide a means to access home equity in the same way a reverse mortgage does, homeowners can later tap into their equity through refinancing or HELOCs but these options are fundamentally different from the features of a reverse mortgage. Therefore, a reverse mortgage is the most fitting choice for those looking to withdraw cash from their home equity.