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You’ve paid off your mortgage—congratulations! Besides the relief of saying goodbye to pesky monthly mortgage payments, this milestone means you own your home outright. With 100% equity in your property, you now have added financial flexibility. Whether you’re eyeing a major expense or need cash for ongoing costs, tapping that equity can be tempting.

But are there loans that allow you to convert the equity from your paid-off house? And now that you own your home free and clear, is borrowing against it the smartest move?

Can I Get a Home Equity Loan On My Paid-Off House?

Can you get ahome equity loan on a house that’s already paid off? In short: yes. However, before the cash hits your account, be prepared for some key steps.

While you no longer have a mortgage,lenders will still require proof that you can comfortably repay the loan before granting approval. Remember, much like a traditional mortgage, a home equity loan uses your home as collateral—unlike anunsecured personal loan or line of credit—so you risk losing your house if you default on payments.

Once you understand the risks and are ready to move forward, you’ll then need to determine the best loan option that meets your goals.

For example, you could take out a home equity loan for a lump sum of cash, open a home equity line of credit for flexible access to smaller amounts as needed or choose acash-out refinance, which replaces your original mortgage and lets you tap a much larger amount.

How Much Equity Can I Borrow From a Paid-Off House?

Depending on the lender, you may be able to borrow up to 100% of your equity if you no longer have a mortgage balance. However, expect most lenders to cap loans at 80% to 85% of your home’s value—also known as theloan-to-value (LTV) ratio—to ensure you retain at least a 15% to 20% equity cushion in case your appraised home value drops.

Lenders will also have other eligibility requirements that can impact how much you’ll be able to borrow. Here’s an example showing how a lender determines the portion of your equity you may be able to borrow against:

Appraised value of paid-off house	$500,000
Maximum LTV ratio	85%
Maximum loan amount	$425,000
15% home equity remaining	$75,000

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4 Popular Ways To Get Equity Out of a Paid-Off House

Owning your home outright gives you valuable borrowing power. Here are four common ways to turn that equity into cash, each of which is suited to different financial goals and needs.

Home Equity Loan

Who it’s best for: Homeowners with one large expense who want predictable payments

A home equity loan provides a lump sum of cash that you repay in fixed installments over five to 30 years. With a fixed interest rate, your payments stay consistent, making budgeting easier. Mosthome equity loan lenders let you borrow up to 80% to 85% of your home’s value, though some may go higher. Home equity loans are potentially tax-deductible.

Home Equity Line of Credit (HELOC)

Who it’s best for: Borrowers who need flexible access to funds over time

Ahome equity line of credit (HELOC) functions like a credit card secured by your home. You can borrow, repay and borrow again during the draw period—typically 10 to 20 years—and pay interest only on what you use. Rates are usually variable, though some lenders allow you to lock in fixed rates on certain withdrawals. Like home equity loans,HELOCs are also potentially tax-deductible.

Cash-Out Refinance

Who it’s best for: Homeowners who want to refinance to get better loan terms or higher borrowing limits

With a cash-out refinance, you replace your mortgage with a new, larger one and pocket the difference in cash. If your home is paid off, you can usually borrow up to 80% of its value. This option may offer lower rates or higher limits than a home equity loan or HELOC but typically comes with closing costs that range between 2% and 6%, similar to your original mortgage.

Reverse Mortgage

Who it’s best for: Homeowners age 62 or older who want to access cash without monthly payments

A reverse mortgage lets you borrow against the value of your primary residence and receive the funds as a lump sum, monthly payments or a line of credit. With this loan, you don’t make monthly payments. Instead, you repay yourreverse mortgage lender when you sell the home or move out permanently. Keep in mind, though, that your home must be in good condition to qualify, it must remain your primary residence, and you are still responsible for property taxes, homeowners insurance and upkeep.

Pros and Cons of Tapping Equity on a Paid-Off House

Accessing the equity in your paid-off home can provide financial flexibility, but it also comes with risks. Here’s a quick look at the key advantages and drawbacks.

PROS	CONS
Easier loan approval: Without a first mortgage or other liens against your property , lenders see less risk, which can make it simpler to qualify for a home equity loan, HELOC or cash-out refinance	Reintroduces monthly payments: Once you tap your equity, you're adding a new loan payment and reducing an asset you fully owned
Lower borrowing costs: Secured loans like HELOCs and home equity loans, which use your property as collateral, usually have lower interest rates than unsecured loans like personal loans and credit cards	Your home becomes collateral (again): Borrowing against your property puts your home at risk, so missing payments could lead to foreclosure
Flexible repayment options: Home equity products and cash-out refinances often offer longer repayment periods up to 30 years, which can lower monthly payments	Interest costs: As home equity loans and cash-out refinances often have longer terms than unsecured loans, you may end up paying more interest in the long run
Potential tax benefits: Borrowers who use a home equity loan or HELOC to buy, build or substantially improve a main or secondary home may be eligible for a tax deduction	Risk of value fluctuations: If your home's value drops, you could owe more than your house is worth —also known as being underwater—and lenders may freeze your credit line if you have a HELOC

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Home Equity Loan Requirements

Having equity in your home is a great start but doesn’t automatically guarantee loan approval. Lenders want to see that you’re financially stable and capable of managing additional debt.

While exact criteria can vary, here are common requirements you’ll need to meet to qualify for a home equity loan:

• Sufficient home equity. Most lenders require you to retain 15% to 20% equity in your property after borrowing, though some might allow 10%.
• Good credit score. A minimum of 660 is often required to qualify.
• Strong payment history. Lenders will review yourcredit report to confirm you’ve consistently maintained on-time payments.
• Low debt-to-income (DTI) ratio. Yourdebt-to-income ratio measures how much of your monthly income goes toward debt payments, with most lenders preferring a maximum DTI ratio of 45% or below.
• Stable, verifiable income. You’ll need to show steady income that demonstrates your ability to afford the loan.
• Homeowners insurance. Lenders typically requirehomeowners insurance to protect both you and the lender’s financial interest in your property.
• Professional home appraisal. As part of the approval process, most lenders set up ahome appraisal to determine your property value and equity.

How To Apply for a Loan for a Paid-Off House

1. Estimate your home’s value. Start by getting a sense of what your home is worth. Hire either a professional appraiser or review recent assessments or comparable home sales in your area. Having a ballpark value will help you estimate how much equity you can access.
2. Check your credit.Review your credit score to ensure it meets your lender’s minimum requirements. Lenders typically require a minimum 620 score for a cash-out refinance and a 660 for a home equity loan or HELOC. It’s also a good idea to pull your full reports from all three major credit bureaus to check for errors or areas for improvement. If you spot mistakes, dispute them to help raise your score before submitting your application.
3. Understand your DTI ratio. Lenders also review your DTI ratio to gauge if you can handle the monthly payments. DTI is calculated by dividing your total recurring monthly debt payments by your gross monthly income. Most lenders offering home equity loans prefer a DTI ratio below 45%, with anything under 35% considered ideal. The lower your ratio, the better your chances are of approval and securing more favorable rates and terms.
4. Decide how much you want to borrow. By now, you should know the purpose of the loan and your comfortable monthly repayment budget. Resist the temptation to borrow the full amount lenders offer. Remember, the more you borrow, the higher your monthly payments and the greater the risk of losing your home if you fall behind.
5. Compare lenders and loan types. Shop multiple lenders to find the best fit for your financial goals. Compare interest rates, repayment terms, fees and loan estimates, if applicable.
6. Gather your documentation. You’ll need many of the same documents you used for your original mortgage. Be prepared to provide proof of income and employment, recent pay stubs, W-2s or tax returns, bank and investment statements and proof of homeowners insurance. Organizing these ahead of time can help speed up the process.
7. Submit your application. Once you’ve selected a lender, complete the formal application. Many lenders offer an online process, though some may require a phone call or an in-person visit. You’ll submit your documentation and any additional details requested for underwriting. Lenders may also schedule a home appraisal at this stage.
8. Wait for approval. Theunderwriting process can take up to four weeks or more as the lender verifies your financial and application information. Be prepared to answer questions or provide extra documentation.
9. Close and receive your funds: If your loan is approved, your lender will schedule a closing date. You’ll sign your final loan documents and disclosures at that time. Once closing is complete, your funds typically become available within three business days, during which time you have the legal right to cancel the loan without penalty.