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Retirement

Dave Ramsey's Advice on Tapping Home Equity in Retirement, and When It Actually Makes Sense

Ramsey warns retirees against borrowing against their homes. Here's the reasoning behind that view, how equity can be accessed without new debt, and what to weigh before deciding.

By The Money Zone Editors Updated November 12, 2026

Short answer: Dave Ramsey has long argued that retirees should avoid borrowing against their homes through HELOCs, home equity loans, or reverse mortgages. In his view, if you need to unlock equity, selling and moving to a less expensive home is the safer route. Borrowing adds debt and risk at the stage of life when income is usually fixed. Selling or downsizing turns equity into cash without creating a new payment.

What Ramsey's Approach Boils Down To

Ramsey's broader philosophy centers on avoiding debt and owning your home outright. Applied to retirement, that leads to a few consistent positions:

  • A paid-off home is a safety net. No mortgage payment lowers the income you need each month.
  • Borrowing against the house puts it at risk. A HELOC or home equity loan is secured by your home. If payments become unaffordable, the home is on the line.
  • Reverse mortgages draw particular criticism. He has been a vocal skeptic, pointing to fees, growing loan balances, and reduced equity left for heirs.
  • Downsizing is the preferred path. Selling a larger home and buying a smaller one with cash frees up money with no new loan.

The Main Ways to Access Home Equity

Before weighing anyone's advice, it helps to know what each option actually does.

Sell and downsize

You sell, buy or rent something cheaper, and keep the difference after costs. There's no debt, but there are real expenses: agent commissions, closing costs, moving, and possibly updates to the new place. It also means leaving your current home.

Home equity loan or HELOC

A home equity loan gives a lump sum with fixed payments. A HELOC works more like a credit line, often with a variable rate. Both require monthly payments and qualifying income, which can be harder to show once you've stopped working.

Cash-out refinance

This replaces your existing mortgage with a larger one and pays you the difference in cash. For someone with a paid-off home, it means taking on a brand-new mortgage.

Reverse mortgage (HECM)

The most common type, the federally insured Home Equity Conversion Mortgage, is available to homeowners 62 and older. No monthly loan payment is required. The balance, including interest and fees, grows over time and typically comes due when the borrower sells, moves out permanently, or dies. Borrowers must still pay property taxes, homeowners insurance, and upkeep. Falling behind on those can trigger default. A counseling session with a HUD-approved counselor is required before getting one.

Example: Downsizing vs. Borrowing

Here's a simplified, hypothetical scenario. The numbers are illustrative only.

A retired couple owns a $400,000 home with no mortgage and wants about $100,000 for a cushion.

Option A: Downsize

  • Sale price: $400,000
  • Selling costs (assume about 7%): −$28,000
  • Smaller home bought with cash: −$250,000
  • Moving and setup costs: −$7,000
  • Cash left over: about $115,000, with no loan payment

Option B: Borrow $100,000 with a HELOC

  • At an assumed 8% rate, interest alone is about $8,000 a year, or roughly $667 a month.
  • If the rate is variable, that cost can rise.
  • They keep the house but add a payment to a fixed income.

The trade-off is clear in this example. Downsizing costs the couple their current home. Borrowing costs them ongoing payments and some risk. Which matters more depends on the household.

When Tapping Equity Can Make Sense

Ramsey's caution is a reasonable starting point. Still, many planners see situations where accessing equity is worth a closer look:

  • The house no longer fits. If upkeep, stairs, or property taxes are becoming a burden, downsizing can solve several problems at once.
  • Staying put is a high priority and other assets are thin. Some retirees who want to age in place and have few other resources consider a reverse mortgage as a deliberate, long-term choice, ideally after counseling and comparing costs.
  • A short-term, clearly defined need with a repayment plan. Borrowing for a temporary gap is different from borrowing to cover ongoing living costs.

Warning signs include using home equity to fund everyday spending with no long-term plan, borrowing to make risky investments, or taking on payments that depend on income you aren't sure you'll have.

Alternatives and Next Steps

  1. Review your budget first. Sometimes trimming expenses or adjusting withdrawal timing closes the gap.
  2. Check other income sources. Social Security claiming age, pensions, and existing savings all affect how much you actually need.
  3. Get real numbers on downsizing. Ask local agents about likely sale prices and costs, and price out smaller homes or rentals.
  4. If considering a reverse mortgage, do the counseling. It's required for HECMs and is a useful chance to ask questions.
  5. Talk with a fee-only financial planner. A planner without a stake in selling you a loan can help you compare options for your situation.
  6. Involve family when appropriate. Decisions about the home can affect heirs and caregiving plans.

Bottom Line

Ramsey's message is straightforward: in retirement, don't put your home at risk by borrowing against it. If you need to tap equity, sell and downsize. That approach avoids new debt, but it requires moving. Borrowing options, including reverse mortgages, can fit some situations, but they carry costs and obligations that deserve careful study. Know the trade-offs before treating your home as a source of cash.

FAQ

Does a reverse mortgage mean the bank owns my home?

No. You keep the title. However, the loan balance grows, and it generally must be repaid when you sell, move out permanently, or die. Repayment usually comes from selling the home.

Can I lose my home with a reverse mortgage?

Yes, it's possible. Failing to pay property taxes or insurance, or failing to maintain the home, can put the loan in default.

Is downsizing always cheaper?

Not always. Transaction costs, moving expenses, and local housing prices can shrink the cash you free up. Run the numbers for your specific market.

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