Want to Tap Home Equity Without Refinancing Your Low-Rate Mortgage?

As of the time of this writing in May of 2025, the average 30-year mortgage rate is about 6.76%. While that could change for the better, most experts do not expect it to do so anytime soon.

In fact, industry leaders predict that these rates will be at about 6% by the end of 2026. 

So if someone locked in a low mortgage rate before they began to rise dramatically in 2022, that homeowner would likely consider themselves to be very fortunate today. So why would they consider doing anything that could change it? 

The answer is typically because they want or need to tap into their home equity. Perhaps they have a major home repair or renovation to finance, need to secure funding for medical care, or find themselves without enough cash flow to enjoy their lives. 

If you can relate, the good news is that there are ways to tap into one’s home equity without refinancing a low-rate mortgage. And for many older homeowners, they may be able to do so without having to make new monthly payments that are based on today’s high interest rates.

Why a Cash-Out Refinance Is Not a Popular Move with Today’s Rates

When rates are low, the cash-out refinance is a popular way to access home equity. It works by replacing an existing mortgage with a larger loan, enabling the homeowner to convert part of their home equity into cash. 

The new loan is calculated at the current interest rates when it’s originated. So when rates are lower than the original mortgage rate, it can be a nice deal overall for the borrower.

However, here’s how that scenario could look with today’s interest rates.

Let’s say someone wants to borrow $100,000 to replace their roof, remodel their kitchen, and pay off their high-interest credit card bills.

Cash-Out Refinance Scenario

They own a home that’s worth $400,000 and they have built up $250,000 in equity. Their 15-year mortgage rate is 3.25% and they have a $150,000 balance on their mortgage and 10 years left on the term. Their current fixed monthly mortgage payment is $1,405 for principal and interest only. 

If they did a cash-out refinance with a new 10-year term at 6.75%, their monthly payment would rise to about $3,000 for principal and interest only–more than double their current payment. 

They could walk away with the $100,000 in cash, but their monthly payment would increase by $1,600 per month, not including taxes and insurance.

How About a Home Equity Line of Credit (HELOC)?

While a HELOC maintains the borrower’s existing mortgage rate, it adds a new loan with mandatory monthly payments on top of existing monthly mortgage payments. If you want to learn more, we offer a lot more information about HELOCs in this article.

But the essential drawback with HELOCs is that they can have variable interest rates, ranging from 8.06% to 18% APR (as of the time of this writing). HELOCs typically have a 10-year draw period, where the borrower only needs to pay interest on what they borrow. Then a 20-year repayment period, where they need to make payments on both principal and interest.

HELOC Scenario

Using the above scenario, a HELOC may not be the most practical option as it’s structured as a revolving line of credit, and the borrower has a large fixed amount of equity they would like to access. 

But for the sake of discovery, if the homeowner spent $100,000 at a 9.25% HELOC rate, their monthly payments for the first 10 years would be $771. Then when the 20-year repayment period began, the borrower would have to pay an extra $144 per month for the principal, bringing their monthly HELOC payment up to $915 per month.  

There are two critical things to keep in mind. First, the borrower would still have to make their original mortgage payments until the loan is satisfied, in addition to their HELOC payments. Second, actual HELOC payments could be higher or lower than our example, depending on future interest rate changes. HELOCs typically have variable interest rates that fluctuate with market conditions.

Although HELOCs typically have a variability cap of 5%, in a worst case scenario, there are some payment periods where interest could be as high as 14.25%. With this rate, the borrower could be forced to pay close to $1,250 per month for their HELOC alone.

How About a Home Equity Loan (HEL)?

Like a HELOC, a home equity loan preserves the borrower’s existing mortgage rate, but it offers some key advantages. First, it’s a fixed-rate mortgage, meaning that the borrower wouldn’t have to worry about interest rate surprises and could budget much more effectively. 

Second, it’s a lump sum loan, which would make a lot more sense for the scenario that we’re exploring. But the catch is, HELs typically have higher interest rates than traditional mortgages. At the time of writing, the average HEL rate is 8.42%.

HEL Scenario

Based on the previous situation, if the homeowner took out a $100,000 HEL with a rate of 8.42% for a 15 year term, they would need to make monthly payments of $976.

The question is—could the homeowner handle that extra monthly HEL payment of $976 in addition to their original mortgage payment?

HomeSafe Second: preserving existing mortgage rates—without needing to make additional monthly payments 

There is a new type of loan that enables homeowners to tap into their home equity and does not require the borrower to make monthly payments on the new loan. Instead, the borrower has to take care of the property charges they already have to cover, such as taxes, insurance, the first mortgage and upkeep costs. 

Like HELs, HomeSafe Second loans have a fixed interest rate. A proprietary loan available exclusively through approved lenders like Fairway, HomeSafe Second offers interest rates comparable to a HEL—currently at 9.45%.

Unlike HELs, HomeSafe Second loans are currently only available in CA, CO, CT, FL, MT, NV, OR, SC, TX, UT and WA. 

Equally important, they are only available to homeowners who are 55 and older (62 in TX).

How HomeSafe Second Payments Work

Instead of monthly mortgage payments, HomeSafe Second loans become due and payable when the last borrower permanently moves out of the home, sells the home, or passes away. In this, the loan is typically paid by the sale of the home. 

Keep in mind that with a traditional mortgage product like a HEL, you’re paying it down over time. But with a HomeSafe Second loan, the interest accrues over time. 

But a really great feature of HomeSafe Second is non-recourse protection. If the home sale price isn’t enough to cover the balance of the loan, neither the borrowers nor their heirs are liable to pay the difference. Conversely, if there’s a profit left over, the borrower or their heirs get to keep it. And if the heirs want to keep the home, they can do so by paying off or refinancing the remaining liens.

HomeSafe Second Loan Scenario

Using the same scenario as above, the borrower could likely receive anywhere from $100,000 to $150,000 depending on their age (the borrowing limit increases with age).

As long as they live in the home and pay the necessary property charges, they could simply continue to pay their low interest home mortgage off and enjoy the benefits of their home equity and greater cash flow. 

Assuming they age in place and stay in the home throughout the remainder of their lives, their HomeSafe Second loan would be paid off after they pass. At that point, the borrower’s heirs could decide if they want to keep or sell the home.

You Have Options When It Comes to Home Equity with a Low-Interest Mortgage

As you can see, you have options when it comes to tapping into home equity while maintaining a low-interest mortgage rate. For younger homeowners who intend to be in the workforce for a long time, a HELOC or a HEL can both be great options. 

But for older homeowners who are in the phase of life where they’re mapping out their retirement or are already retired, home equity and greater cash flow can be a potent combination for financial success and a happy life.

Of course, there are no one-size-fits all solutions in life, especially when it comes to home loans and home equity. Reach out to our specialists today. We can work through your specific needs and goals so you can make the best decision for yourself.

Note: Requirements, payment, and other terms for mortgage products discussed in this article may vary between lenders.

The HomeSafe reverse mortgage is a proprietary product of Finance of America Reverse LLC and is not affiliated with the Home Equity Conversion Mortgage (HECM) program.