Reverse Mortgage vs HELOC
Compare a HECM reverse mortgage and a home equity line of credit to decide the best way for homeowners 62 and older to tap into home equity.
Reverse Mortgage (HECM)
Advantages
- No required monthly mortgage payment for as long as you live in the home
- Funds are typically tax-free and can come as a lump sum, monthly payments, or a growing line of credit
- Non-recourse loan, so you and your heirs never owe more than the home is worth when it is repaid
- Qualification is based on equity and a financial assessment rather than income and credit alone
Drawbacks
- Available only to homeowners 62 and older
- The loan balance grows over time as interest accrues, reducing the equity left for heirs
- Higher upfront costs, including FHA mortgage insurance premiums, origination fees, and closing costs
- You must keep up with property taxes, insurance, and maintenance or the loan can become due
Best For
Homeowners 62 and older with substantial equity who plan to stay in the home long-term and want to eliminate a monthly payment or supplement retirement income.
HELOC
Advantages
- No age requirement, so any qualified homeowner can access one
- Lower upfront closing costs than a reverse mortgage
- Draw funds as needed during the draw period and only pay interest on what you borrow
- Keeps your existing first mortgage and its rate in place
Drawbacks
- Requires monthly payments, which can strain a fixed retirement income
- Qualification depends on income, credit score, and debt-to-income ratio
- Variable interest rate means payments can rise over time
- Draw period typically ends after 10 years, after which payments increase during the repayment period
Best For
Homeowners with steady income and good credit who want flexible, lower-cost access to equity and can comfortably handle monthly payments.
Key Differences
| Category | Reverse Mortgage (HECM) | HELOC |
|---|---|---|
| Monthly Payment | None required while you live in the home | Required monthly payments throughout |
| Age Requirement | Must be 62 or older | No age requirement |
| How You Access Funds | Lump sum, monthly payments, or growing line of credit | Revolving credit line during the draw period |
| Qualification | Based on age, equity, and a financial assessment | Based on income, credit score, and debt-to-income ratio |
| Long-Term Outcome | Balance grows; repaid when you sell, move, or pass away | Balance is paid down over time through monthly payments |
The Bottom Line
A reverse mortgage is built for homeowners 62 and older who want to convert equity into cash flow without a monthly payment and plan to stay in the home long-term, accepting that the balance grows and reduces what heirs inherit. A HELOC is the better fit for homeowners who have the income and credit to handle monthly payments, want lower upfront costs, and prefer to keep their existing first mortgage in place. The right choice comes down to your age, income, how long you plan to stay, and whether you can comfortably make a monthly payment.
Run the Numbers
Use the mortgage calculator to see how each option affects your monthly payment and total cost.
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