This article is part of the Retirement Financial Life Equation (FRLE) series. It was initially published in March 2021 and updated in March 2026.
We discussed paying off the mortgage and home equity in previous articles and how our house decisions are both financial and emotional, and very personal. As I wrote in my 2018 article on home equity, it is a significant retirement resource that should be used wisely—a truth that has become even more important after the dramatic housing appreciation of 2020-2024.
There’s also a spiritual component. We want to seek God’s guidance for any major home or home-financing decisions to ensure that we wisely steward the gifts he has given us. We also want to guard against greed and materialism, which can lead to unwise choices.
Paying off the mortgage is only one of the many vital decisions retirees need to make about their housing situation. When I first wrote this article in March 2021, my wife and I were wrestling with these questions ourselves. Now, nearly five years later and seven years into retirement, I can share not only the options but also what we actually decided and how those decisions have worked out—validating some principles while teaching us lessons we didn’t anticipate.
For example, would downsizing to a smaller house, a condo, or patio home—moving to something less costly—better suit your wants and needs? Or does paying off the mortgage and keeping your current home make more sense than downsizing? If so, and you need to make some repairs or want to do some upgrades, what is the best way to pay for them?
Perhaps you want a larger home for lifestyle purposes but with less maintenance that could actually be more costly to buy than what your current house is worth. If so, does it make sense to use savings or take out a new mortgage to make the change? Are there other options?
The landscape for answering these questions has shifted dramatically since 2021, primarily due to two major changes: extraordinary home price appreciation (2020-2024) and a dramatic spike in interest rates (2022-2024). These factors have fundamentally altered the mathematics and wisdom of various housing strategies.
The blessings of “home”
Houses are more than a financial asset (or liability, depending on how you look at it) because they’re our homes. They’re where we live and make memories. They’re also where we may have invested a lot of time and money making them functional, comfortable, and appealing.
The concept of home is found in the Bible. It has both physical and spiritual connotations.
Isaiah 32:18 seems to express the value that God places on our homes as a place of sanctuary: “My people will live in peaceful dwelling places, in secure homes, in undisturbed places of rest.”
Isaiah 65:21–22 conveys the blessings of home:
“They will build houses and dwell in them; they will plant vineyards and eat their fruit. No longer will they build houses and others live in them, or plant and others eat. For as the days of a tree, so will be the days of my people; my chosen ones will long enjoy the work of their hands.”
And Proverbs 3:33 says that God “blesses the home of the righteous.”
In our fallen world, homes can be a burden or a blessing, but they’re usually a mix of both. Retirees will find that their homes are increasingly important, especially as they age and spend more time there. This is why the decisions concerning them can be difficult.
Having lived through nearly five years since writing the original version of this article, I can confirm this truth even more deeply. Our home has become increasingly central to our lives—the place where we work (I write and maintain this blog from home), rest, entertain family and friends, and increasingly, where we spend the majority of our time. The decisions we make about housing aren’t just financial—they shape the daily experience of retirement in profound ways.
Decisions, decisions
There are several options for retirees who own a house with sizable home equity. Which one makes sense for you and me depends on our objectives and financial situation. The options I outlined in 2021 remain valid, though the financial calculations have changed substantially.
1. Need to reduce total housing expenses? Sell the house and downsize.
Many retirees sell and then downsize to reduce total housing expenses. But if you sell, you will still have to live somewhere. If “somewhere” doesn’t cost less than where you live now, you’re back where you started.
If you sell a sizeable paid-for house or one with a lot of equity, you may be able to purchase a smaller one with no mortgage, even if you had a mortgage on the larger one. That can be a big help in managing expenses in retirement.
The mathematics of downsizing have become more attractive since 2021 due to the dramatic home price appreciation that occurred during 2020-2024. As I discussed in my updated home equity article, median home values rose from approximately $300,000 in 2021 to $420,000 in 2025—a 40% increase in just four years. For homeowners who purchased before 2020, equity accumulation has been extraordinary.
However, there’s a catch that wasn’t as significant in 2021: smaller homes have also appreciated dramatically. If you’re downsizing within the same geographic area, you’re selling high but also buying high. The spread between larger and smaller homes has narrowed in many markets, reducing the cash freed up from downsizing. Additionally, transaction costs (realtor commissions, closing costs, moving expenses) now typically run 8-10% of home value—$42,000 on a $525,000 home—which must be factored into downsizing calculations.
I’ve watched several friends downsize successfully over the past few years. Those who executed during 2019-2021, before prices peaked and while mortgage rates were still low (2-3%), captured maximum benefit. Those who downsized in 2024-2025 still benefited from expense reductions but found the cash freed up was less than expected because smaller homes had appreciated proportionally.
You could sell and rent, but then you’ll need enough income to pay the monthly rental payment. (Some say it can be less costly to rent than to own. I’ve never done a detailed analysis of that, but I can see how it might be true, especially when you factor in maintenance, property taxes, insurance, and the opportunity cost of capital tied up in home equity.)
If you’re thinking about renting (which may be a good choice for many), keep in mind the “Rule of 300” that I explained in my previous mortgage article: For every $300/month in housing expenses, you need approximately $90,000 in savings (assuming 4% withdrawal rate) to fund that expense indefinitely. A $2,000/month rental, therefore, requires roughly $600,000 in additional retirement savings to sustain.
2. Want to keep the house but need to make repairs (or want to make upgrades)? Use savings or take out a home equity loan (HEL) or home equity line of credit (HELOC).
If you have an older home, you know the challenges: once you get past 10 to 20 years, you have what seems like a continual string of things that need to be repaired and replaced. Plus, there are ongoing challenges with yard maintenance.
Retirees who want to stay put need to make financial allowances for such things, and here are some ways to go about it:
Spend some of your non-retirement savings or withdraw a lump sum from your retirement savings.
Optimally, you’d use non-retirement, after-tax savings instead of drawing from your retirement savings. If that’s not possible and you use some of your retirement savings (which are in a traditional IRA), you’ll have to pay taxes on it. Plus, that could push you into a higher marginal tax bracket as the IRS requires that you add the withdrawal amount to your other income in the year it’s withdrawn.
You can avoid the taxes by using money from a Roth IRA since you can spend it tax-free. However, if only some of your savings are in a Roth, it might be better to leave them alone for as long as possible to have that tax-free income later in life when tax rates may be much higher.
This is the approach my wife and I ultimately took for the repairs and upgrades we needed. We used non-retirement savings rather than taking on debt through a HELOC, though we already had a HELOC established as a backup. The decision was partly philosophical (avoiding debt) and partly mathematical (HELOC rates spiked from 3-4% in 2021 to 8-10% during 2022-2024, making borrowing expensive). Using savings meant paying taxes on investment gains, but we avoided the ongoing interest charges that would have exceeded those taxes over time.
Take some cash out of the house using either a home equity loan (HEL) or a home equity line of credit (HELOC).
If you don’t sell your house, the only other way to get at the equity is to borrow against it. The benefit is obvious: you can use the equity for any purpose. The main drawback also becomes apparent: you’re drawing down equity while also making monthly payments.
Borrowing may make sense if you want to stay in your current home but need a lump sum for maintenance, home improvements, or to spend on something else. You have to make sure you can afford the monthly payments. Plus, as we discussed in my previous articles, it’s wise to pay the loan back as soon as possible.
The HELOC environment has changed dramatically since I wrote this article in 2021. At that time, HELOCs were available at 3-4% interest rates, making them relatively attractive for short-term borrowing needs. During 2022-2024, as the Federal Reserve raised rates aggressively to combat inflation, HELOC rates spiked to 8-10% or higher. As of late 2025, rates have moderated somewhat to 7-9%, but they remain roughly double what they were in 2021.
This rate environment makes HELOCs far more expensive than they were just a few years ago. Where a $50,000 HELOC balance in 2021 would have cost roughly $125/month in interest (at 3%), that same balance in 2025 costs $300-375/month (at 7-9%)—nearly triple the carrying cost. This fundamentally changes the cost-benefit calculation of borrowing against home equity.
I’m not crazy about the idea of taking on debt, especially if you have a paid-for house, but I’m not too fond of the idea of using retirement savings (and paying the taxes on them) either. The right choice depends on your specific situation, your tax bracket, your available liquid savings, current interest rates, and how quickly you can pay back borrowed funds.
There are two main ways to borrow against your home: a home equity loan (HEL) or a home equity line of credit (HELOC), and they differ in some critical ways.
[The article continues with the original detailed HELOC interest calculation explanation]
The HELOC’s advantage is that it isn’t amortized like a traditional first or second mortgage. You can make interest-only payments and pay back the principal at your leisure (or when you eventually sell the house). However, at current rates of 7-9%, even interest-only payments are substantial.
The big drawback is that the interest rate is not fixed and will rise with the prime interest rate. When I wrote this article in March 2021, the prime rate was 3.25%, and HELOCs were around 3-4%. By mid-2023, the prime rate had risen to 8.5%, causing HELOC rates to spike to 9-10% or higher. As of late 2025, the prime rate is around 7.5%, with HELOC rates typically 7-9%. This volatility makes HELOCs riskier than they were during the low-rate environment of 2010-2021.
By the way, regardless of whether you take out a HELOC or home equity loan, the interest may be deductible, just like interest on a typical first mortgage—but only if you itemize deductions and use the funds for home improvements. The Tax Cuts and Jobs Act of 2017 eliminated the deduction for home equity debt used for other purposes (paying off credit cards, funding vacations, etc.). Like any mortgage loan, the HELOC or home equity loan is secured by your home as collateral, meaning that you could lose the house to foreclosure if you default on payment.
3. Want to keep the house but need to convert home equity to income? Take out a reverse mortgage.
This option is similar to #2 above, except with a reverse mortgage, you don’t have to make monthly payments. Instead, you receive a lump sum or regular payments to use for any purpose you choose. Most retirees use the money to help cover their expenses, typically later in retirement, perhaps to fund long-term care.
The loan (plus accrued interest) is repaid upon your demise, when you sell your home, or when it is no longer your primary residence.
Just like a home equity loan or HELOC, reverse mortgages deplete equity. They have negative amortization, meaning they add to the outstanding principal rather than pay it down. That may or may not be an issue depending on your situation. (You can read more about reverse mortgages in my updated home equity article.)
Since 2021, reverse mortgages have become both more expensive (due to higher interest rates) and more tightly regulated (due to continued reforms). As I detailed in my updated 2026 home equity article, reverse mortgage rates have risen from 5-6% in 2021 to 7-9% or higher in 2025, meaning equity depletes faster than before. Upfront costs remain substantial—typically 5-7% of home value—and mandatory financial assessments now verify that borrowers can afford ongoing property taxes, insurance, and maintenance.
There are a lot of pros and cons to reverse mortgages. They can also be complex and costly. So, be sure to do your homework if you think you’re a candidate for one. My position remains what it was in 2018 and 2021: reverse mortgages should be a last resort after exploring alternatives like downsizing, part-time work, delaying Social Security, or purchasing annuities with liquid savings.
4. Want to keep the house but move later? Stay put and plan to move in the future.
This option may be the most desirable for those in the first five, ten, or fifteen years of retirement.
Your housing needs may change significantly once or twice during a 30-year retirement. You may need the larger home for the children and grandchildren to visit for many years after you retire. But you may find at some point that you don’t need all that room, and you could do without the maintenance chores and expense.
Or, as you age, you may find that your home isn’t well suited to your physical limitations. Can it be modified to work for you? If so, you could use any of the other options discussed here to get that done.
This is essentially the path my wife and I followed over the past 9 years. We decided to stay put, make necessary repairs and modest upgrades to our paid-for home, and plan to reassess our housing needs as we move further into our 70s and 80s. The decision has worked well so far—we’re still close to family, church, and shopping, and the house serves our needs adequately. But we recognize this may change (and it did) as we age. We were prepared to reconsider downsizing or modifications if our circumstances shift or a good opportunity presented itself.
The blessing of having a paid-for house is that it gives you time and flexibility to make housing decisions thoughtfully rather than under financial pressure. We’re not forced to downsize for financial reasons; instead, lifestyle factors (maintenance burden, physical limitations, desire to simplify) drove the decision, not economic necessity.
5. Want to move to a larger or newer (i.e., more expensive) house? Sell and then buy with a plan to fund the additional expense.
Deciding to purchase a new home and move in retirement is a big deal, especially if you need extra cash to make it work. As with the other scenarios, you have some options:
Take a chunk of your retirement savings to buy your retirement “dream house.”
Whether this makes sense for you depends on how much you have in savings. You don’t want to reduce your income-producing assets if things are tight. Your new house may appreciate in value, but it doesn’t produce income (unless you rent it out).
The key question is whether converting liquid, income-producing assets into illiquid home equity improves or degrades your overall financial security. Some financial advisors suggest that real estate in various forms (primary residence, second home, rental property, etc.) could comprise up to one-third of net worth and still maintain a balanced and diverse portfolio. Going significantly beyond that concentration increases risk.
And, in theory, a retiree could put most (if not all) of their net worth into their home and then use one of those financial methods to take money out as needed for living expenses. Your home equity would then be as large as your net worth.
That said, an “all eggs in one basket” approach is probably unwise—a real estate crash will break all of them. We saw modest corrections in some markets during 2024-2025 after the extraordinary appreciation of 2020-2023, reminding us that housing values don’t only go up.
As with any house purchase, you could take out a new mortgage.
That means a monthly payment for 10, 20, or 30 years. And if you get a new mortgage, you have to be able to make the payments (there’s that “rule of 300” again).
The mortgage environment has changed dramatically since 2021, when I wrote this article. At that time, 30-year fixed mortgage rates were around 3%, making new mortgages extraordinarily affordable. During 2022-2023, rates spiked to 7-8%—more than doubling in less than two years. As of late 2025, rates have moderated to around 6.5-7%, but they remain roughly double the 2021 levels.
This rate environment has made taking out new mortgages in retirement far more expensive than it was just a few years ago. A $300,000 mortgage at 3% (2021) costs approximately $1,265/month in principal and interest. That same mortgage at 7% (2025) costs approximately $1,996/month—$731 more per month or $8,772 annually. Using the Rule of 300, that additional monthly cost requires approximately $219,000 more in retirement savings to sustain.
When I had a mortgage, I always tried to keep my housing expenses below 25% of after-tax income. I realize that’s very conservative. Now that we’re retired and without a mortgage, our housing expenses (taxes, insurance, utilities, maintenance) run about 15% of our retirement income—a dramatic reduction that creates substantial financial margin.
One of the challenges with getting a mortgage in retirement is qualifying when you have little or no W-2 income and only income from Social Security and investment portfolios. You may need to get what is known as an “asset-based mortgage” unless you can show sufficient income (dividends and interest) from your investment assets. These specialized mortgages typically require larger down payments (25-30%) and may carry slightly higher interest rates than conventional mortgages.
There’s another option, which is to use a reverse mortgage, also known as a “Home Equity Conversion Mortgage (HECM) for Purchase.”
It’s an interesting option for those who want to “upsize” (i.e., buy a bigger home, a more expensive one, or both) in retirement.
[The article continues with the original HECM for Purchase explanation and example]
The HECM for Purchase example I provided in 2021 remains structurally accurate, though the actual numbers have changed due to higher interest rates. A reverse mortgage that would have accrued at 4-5% in 2021 now accrues at 7-9% in 2025, meaning the loan balance grows faster and equity depletes more quickly. This makes the HECM for Purchase even more expensive than it was when I first wrote about it, though it remains a viable option for retirees who are highly motivated to purchase a more expensive home without traditional mortgage payments.
What we actually did
As I mentioned in the original 2021 article, my wife and I were wrestling with these decisions ourselves at the time. We needed to make home repairs and wanted to do some upgrades. We were considering downsizing or possibly moving to a newer house of comparable size.
Well, as it turned out, we didn’t stay put after all. In 2024—about three years after writing the original version of this article—we made a major transition. We “rightsized” our living arrangement, moving from our older, moderately sized single-story home (where we’d lived for about 20 years) to a newer courtyard (patio) home that is slightly smaller with smaller rooms and closets but significantly easier to maintain.
How the decision happened
As I wrote in my September 2024 article on rightsizing, this happened rather suddenly because this type of house can be hard to find in our area and tends to be expensive. We’d been keeping our eyes open for a resale of a newer single-family home (we didn’t want to build from scratch) with easier and less expensive house and yard maintenance in a quiet neighborhood no more than 10-15 minutes from our church.
Just such a home came up for resale that we both liked, and we decided to make an offer. Our house wasn’t on the market yet, and we weren’t prepared to put it on. However, our offer on the new house wasn’t a contingency offer (nobody does those anymore because sellers don’t like them). It was accepted, so we were off to the races.
We had a lot of work to do to get our old house ready to show. When we put it on the market about two weeks later, it sold on the first day. Plus, we got an offer that was more than our asking price. It was quite a whirlwind, but we were grateful for the quick sale.
The financial logistics
From a financial standpoint, I wanted to avoid borrowing money to make the move. Our contracts were structured to allow us to sell our house before buying the new home. But that presented a challenge—the buyer wanted to close in approximately 30 days, giving us little time to pack and move.
By God’s grace, we pulled it off and had back-to-back closings a few weeks later. The proceeds from the sale of our old home (the first closing) were wired directly to the closing agent for the new house, so no loans were involved. We sold our appreciated home, used the proceeds to purchase the new one, and completed the entire transition without taking on any debt—precisely the scenario I outlined as option #5 in the original 2021 article.
Of course, it doesn’t always work that way. Sometimes you must take out a new mortgage, if only for a short term, until your current house sells if you need to close on the new home before then. However, avoiding those additional upfront costs and interest payments is far better if you can manage it, especially in today’s 6.5-7% mortgage rate environment.
The decluttering challenge
After living in our house for about 20 years, we had accumulated a lot of “stuff.” Moving to a slightly smaller home with smaller closets forced us to make difficult decisions about what to keep, what to sell, what to donate, and what to give away.
We sold some things (actually, my son did that for us), gave away items to our kids and friends, and stored quite a bit in a storage unit for our church’s annual yard sale that raises funds for the college ministry. The process of letting go was much more challenging than any previous move we’d made—not just physically but emotionally and psychologically.
As I reflected in my rightsizing article, there’s “a little hoarder in all of us.” We hold onto things for various reasons: utility value (we use them regularly), sentimental attachment (heirlooms and keepsakes), or simply because we think “someday I’ll need this.” The Bible warns us about becoming overly attached to worldly possessions (Luke 12:15), reminding us that “a man’s life does not consist in the abundance of his possessions.”
Letting go forced us to examine what truly matters. My wife’s father’s conch shell—picked up decades ago on Caribbean mission trips or saltwater fishing expeditions—has sentimental value worth preserving. My father’s Marine Corps dress sword and my uncle’s handmade cedar trolling lure connect me to family history. But my old Little League jersey and collection of 10K race t-shirts from my 20s and 30s that I’ll never fit into again? Those had to go.
Key factors in our decision to move:
- The right opportunity appeared: We’d been casually looking for years, but the specific type of home we wanted (single-story courtyard/patio home, newer construction, good location, reasonable price) rarely came on the market. When it did, we had to act quickly or lose the opportunity.
- Reduced maintenance burden: Our 24-year-old house required increasingly frequent repairs and maintenance. The new home, being only a few years old, should require significantly less maintenance for the next decade or more—precisely the timeframe when we’ll be in our mid-70s to mid-80s and less able or willing to deal with home repairs.
- Planning ahead for my wife: As I mentioned in my 2023 reflections, I wanted to make this move while I’m still here and capable of handling the logistics. Statistically, my wife will likely outlive me, and I’ve seen how hard dealing with major housing transitions can be on surviving spouses. Making this move now, together, while we’re both healthy and in our early 70s, removes that burden from her potential future.
- Maintaining location: We stayed in the same general area—still within 10-15 minutes of church, shopping, medical facilities, and both adult children. We didn’t sacrifice the location value that mattered so much to us.
- Financial feasibility: We were able to execute the move without taking on any debt. The appreciation in our old home (purchased years ago, fully paid off) provided enough equity to purchase the newer home outright. This preserved our financial margin—no mortgage payment to absorb our income.
What we sacrificed
The new home is slightly smaller overall, with notably smaller rooms and closets. We gave up some storage space and had to be more selective about what we kept. The process was stressful—listing our house, selling it on day one above asking price, packing 20 years of accumulated belongings in just a few weeks, coordinating back-to-back closings. It was easily the most challenging move we’ve ever made.
How it’s worked out so far
It’s only been about a year since the move, so it’s early to draw definitive conclusions. But so far, the decision feels right. The new home requires far less maintenance than our old one. The smaller space forces us to live more intentionally with fewer possessions. We’re still close to family, church, and community. And critically, we accomplished the move without debt, preserving our financial margin.
The emotional challenge of letting go proved unexpectedly difficult yet spiritually valuable. Retirement itself is an act of letting go—of titles, roles, professional accomplishments, and career identity. Moving houses required letting go of possessions we’d accumulated over decades. Both transitions forced us to examine what truly matters and where our security ultimately lies—not in career accomplishments or accumulated stuff, but in our identity in Christ and our calling to serve as “elders” (in the broad sense of possessing wisdom, character, and leadership from experience) in our church and community.
Lessons learned from actually making the move
- The right opportunity requires readiness to act quickly. We’d been casually looking for years, but when the right house appeared, we had only days to make a decision. Having our financial house in order (paid-off home, adequate liquid savings, no debt) gave us the flexibility to move quickly when opportunity knocked.
- Transaction timing is crucial. Structuring contracts to sell before buying (but with tight timing) allowed us to avoid bridge financing and use sale proceeds for the purchase. This required careful coordination but saved thousands in interest and fees.
- Start decluttering before you need to move. We should have been gradually purging possessions for years before the move. Trying to do 20 years of decluttering in 2-3 weeks was overwhelming. Start early—even if you’re not planning to move soon, reducing possessions makes life simpler and any future move easier.
- Letting go is spiritually significant. The difficulty of releasing possessions revealed how attached we’d become to things that ultimately don’t matter. The process was a spiritual discipline, reminding us to hold worldly things loosely while focusing on eternal values.
- Moving while both spouses are healthy is a gift. Making this transition together, while we’re both capable of handling the physical and mental demands, has been valuable. If we’d waited until health issues forced the move or until one of us was handling it alone, the burden would have been far greater.
- Reduced maintenance matters more as you age. At 72 when we moved, we were already hiring more maintenance work than we once did ourselves. Moving to a newer home with less square footage and easier yard maintenance will pay increasing dividends as we move through our 70s and 80s.
- Stay in your community if possible. We’ve watched friends move to retirement destinations far from family and church, only to regret the isolation. Staying within our established community while rightsizing our home gave us the best of both worlds—reduced housing burden without sacrificing relationships that matter.
Conclusions
Housing decisions in retirement are complex, involving financial, emotional, practical, and spiritual dimensions. The options I outlined in 2021 remain valid, though the financial calculations have shifted significantly due to home price appreciation and rising interest rates.
The key principles that have emerged from both research and personal experience:
Stay put is often the best default. Unless you have compelling financial or lifestyle reasons to move, the transaction costs and disruption of selling and buying are substantial. If your current home is paid off, appropriately sized, and reasonably located, the burden of proof should be on moving rather than staying.
Avoid taking on housing debt in retirement if possible. With mortgage rates at 6.5-7%, HELOCs at 7-9%, and reverse mortgages at similar levels, borrowing against home equity is far more expensive than it was just a few years ago. Using savings for repairs and upgrades, while not ideal, often costs less over time than paying interest on borrowed funds.
Don’t let appreciation create lifestyle inflation. The dramatic home price appreciation of 2020-2024 was extraordinary and may not repeat. Viewing that appreciation as permanent wealth to be spent can lead to regrets if housing markets correct.
Location and community matter more as you age. Proximity to family, church, medical care, and shopping becomes increasingly valuable in your 70s and 80s. Don’t undervalue these factors when considering moves to retirement destinations.
Keep housing expenses reasonable. Whether by paying off mortgages, downsizing, or avoiding expensive moves, keeping housing costs at 20-25% of retirement income creates margin for other priorities—healthcare, travel, giving, and unexpected expenses.
My wife and I are grateful that we took time to think through and pray about our housing decisions rather than rushing into changes. Staying in our paid-for home has served us well, though we remain open to future changes as our needs evolve. The key is making thoughtful decisions, seeking wisdom, and recognizing that housing in retirement serves both practical and spiritual purposes—not just as a financial asset, but as the place where we live out our remaining years in service to God and others.