As Milton Friedman said, there is nothing wrong with operating based on self-interest:
https://www.youtube.com/watch?v=RWsx1X8PV_A.
Self interest is inherent in the human psyche. As long as you are not violating law or contract, conduct yourself based on self interest and all of society collectively will benefit.
If your debt is unpaid at your demise, the lender will take it from your estate (or, more precisely, the securitized collateral) via established legal principles and procedures. Banks are fine-tuned to collect their loans. Unless you are making fraudulent representations on your loan application, which will justifiably earn you time in your local prison, you are fine. The bank will be aware of your age, the value of your property, and other pertinent details.
As to your Options (1) and (2), you did not provide enough information to enable a thoughtful analysis. Some considerations:
(1) It sounds like you want to take money out of a mortgage for other purposes (travel, etc.). That's a bad idea. You are putting your lodging at risk to visit Hawaii and explore a potential retirement career in cooking, basket-weaving, aviation, scuba diving or the like? Even if a bank would lend on those facts, I'd never use a mortgage for anything other than paying down the debt on the house.
(2) Homes are a place to live in, not an investment (caveat: I recognize exceptions apply).
(3) Never buy a house unless you intend to live in it for five years or more.
(4) Never take out a HELOC for trivial matters (see (1) above).
(5) Select the housing option that best meets your needs. To evaluate this, you need to provide information such as interest rates, rental rates in your area, etc.
(6) You provided scant information regarding your financial situation. The default rule is to shed indebtedness heading into retirement. If I were 58, no way in heck would I ever take on more debt, but everybody's situation is different.