Your Mortgage and Home Equity should be part of your Financial Planning

A recent MarketWatch article featured a reader question that probably sounds familiar to a lot of people approaching retirement. Here’s the situation as the reader described it:

“I’m 57, single, have $300,000 in a 401(k) and about $12,000 in savings in different accounts. I owe $93,000 on a house and have $20,000 in credit card debt. I make about $100,000 per year. Should I consolidate my savings? Should I pay off my credit card with the savings and then rebuild my account? I am working on paying off the credit card but I have terrible spending habits. I really don’t want to work until I’m 67. What advice do you have? Should I hire a financial planner to help me?” — MarketWatch reader question

MarketWatch’s advice wasn’t bad — pay off the debt with income rather than savings, curb spending, and max out retirement contributions. Solid basics. But the article missed something significant: this person owns a home with only $93,000 left on the mortgage. That home equity is a financial tool, and it was barely mentioned.

As a mortgage advisor, I see this gap all the time. People plan for retirement around their income and their investment accounts — but they overlook the equity sitting in their home. Here’s how I’d think through this situation.

The Big Picture: What This Person Actually Needs

Let’s be direct: $312,000 in total savings with 10 years (or fewer) until retirement is a real challenge. The priority has to be accelerating retirement contributions as aggressively as possible. At 57, this person is eligible for catch-up contributions to their 401(k) — an extra $7,500 per year above the standard limit. That should be the foundation.

The good news: they own a home. That changes the conversation.

Option 1: Buy the Home You Want to Retire In

If this person is still working and earning $100,000 a year, they can still qualify for a mortgage — and now may actually be the right time to buy their retirement home.

Here’s how the math could work in their favor:

• Sell the current home and use the proceeds strategically
• Pay off the $20,000 in credit card debt at closing — eliminating that high-interest drag immediately
• Use remaining equity to supplement retirement savings, not just the down payment on the next home
• Buy a home better suited for retirement — single-story, lower-maintenance, or in the location they actually want to be

The key here is not dumping every dollar of equity into a down payment. Keeping some liquid gives them flexibility heading into retirement.

Option 2: Stay Put and Access the Equity You Already Have

If moving isn’t the goal, there are several ways to put that home equity to work:

Cash-Out Refinance

Replace the existing mortgage with a new, larger loan and take the difference in cash. This could pay off the credit card debt and potentially free up monthly income to redirect toward retirement savings. It may also increase the mortgage payment depending on the size of the new mortgage and loan amount.

Home Equity Line of Credit (HELOC)

A traditional HELOC gives access to equity as a revolving line of credit. This could cover the credit card payoff while keeping the existing mortgage in place.

First Lien HELOC with a Sweep Account

This is the option I’m most excited to be able to offer. It’s a 30-year home equity line of credit that replaces the first mortgage and works in tandem with a linked bank account. Here’s how it works:

• Every dollar deposited into the linked account is automatically applied to reduce the principal balance with the mortgage re-amortizing daily.
• Because interest is calculated on the daily balance, even temporary reductions (like a paycheck sitting in the account before bills come out) reduce the interest you owe
• You maintain access to your equity as a line of credit throughout the life of the loan
• The result: most borrowers pay off their home significantly faster than a traditional 30-year mortgage — without making extra payments

For someone approaching retirement, this structure has another major advantage: ongoing access to home equity. Rather than having equity locked up in the home, it’s available as a credit line when needed. Many people call this “the last mortgage you’ll ever need” — and for good reason. Actually, a person could also use this mortgage to buy the home they want to retire in – this is not limited to refinancing.

What About Paying Off the Mortgage Entirely?

It’s a common instinct: head into retirement debt-free. And there’s real peace of mind in not having a mortgage payment. But I’d encourage thinking about it differently.

Equity that’s locked inside a home isn’t available when you need it. If something comes up in retirement — a health expense, a home repair, an opportunity — you’d need to sell or take out a new loan to access it. Having a structure like the First Lien HELOC means you get to pay down the home aggressively while keeping the equity accessible.

You can still prioritize paying off the home. You’ll just also have a safety net.

A Note on Reverse Mortgages

At 57, this person is too young to qualify for a reverse mortgage (the minimum age is 62). But even for those who do qualify, I’d generally recommend the First Lien HELOC first — it provides similar access to equity with more flexibility and without the costs associated with a reverse mortgage.

The Bigger Point MarketWatch Missed

Financial planning for retirement shouldn’t happen in a silo. Your mortgage and your home equity are part of your financial picture — they can be tools for restructuring debt, preserving cash flow, and building flexibility for the years ahead.

Using income to pay down high-interest credit card debt rather than investing it toward retirement is an expensive trade-off. In many cases, accessing home equity to eliminate that debt — and redirect income toward retirement — is the smarter move.

Every situation is different, which is why I prefer to look at the whole picture before making a recommendation.

Ready to See What Your Options Look Like?

If you’re in a similar situation — approaching retirement, carrying some debt, and wondering how your home equity fits into the picture — I’d love to run through some scenarios with you. I can show you what a cash-out refinance, a traditional HELOC, or the First Lien HELOC with sweep account would actually look like for your specific numbers.

Schedule a consultation below or reach out directly. There’s no obligation — just a conversation about your options.