HELOC vs Reverse Mortgage
Last updated July 2026
HELOC (Home Equity Line of Credit)
Second-lien revolving credit against your home equity
Advantages
- Draw only what you need, pay interest only on what you use
- Available at any adult age with income and equity
- Lower total cost than a reverse mortgage in most cases
- You maintain full ownership of the home
- Reborrow as you pay down the balance during the draw period
Drawbacks
- Requires monthly payments
- Variable rate, payments can increase
- Requires income and credit to qualify
- Payment shock when draw period ends
Reverse Mortgage (HECM)
Retiree-only mortgage with no monthly payments, repaid when you sell or move
Advantages
- No monthly payments while you live in the home
- Loan proceeds tax-free (they're loan proceeds, not income)
- Available at age 62+ with equity
- Cannot be forced out of the home due to loan (as long as taxes and insurance are paid)
- Federally insured (HECM) with borrower protections
Drawbacks
- Interest accrues on the balance and reduces heirs' equity
- High origination and mortgage insurance costs (typically 3-6% upfront)
- Must be your primary residence
- Failure to pay property taxes or insurance can trigger default
- Reduces future equity available to heirs
HELOC and reverse mortgage both tap home equity but serve very different life stages. A HELOC is a revolving line of credit with monthly payments, available to anyone with equity and income. A reverse mortgage is a retiree-only product (age 62+) with no monthly payments, the loan is repaid when you sell, move, or pass. Age and income situation usually decide it.
Feature Comparison
| Feature | HELOC (Home Equity Line of Credit) | Reverse Mortgage (HECM) |
|---|---|---|
| Loan Structure | Second-lien revolving credit | First-lien reverse mortgage with growing balance |
| Eligibility | Adults with income and equity | Age 62+, sufficient equity, primary residence only |
| Monthly Payment | Required (interest-only during draw) | None while living in home |
| Loan Repayment | Repaid during repayment period | Repaid when home is sold or borrower moves/dies |
| Total Cost | Interest + closing costs | Interest compounding + upfront fees 3-6% |
| Maximum Amount | Up to 80-85% CLTV typical | Based on age, home value, current rates |
| Home Ownership | Full retained | Retained; growing loan balance |
| Counseling Required | None | Yes, HUD-approved counseling before origination |
HELOC (Home Equity Line of Credit) Wins
HELOC wins for anyone with income to service payments, cheaper total cost and preserves equity. Reverse mortgage wins for retirees 62+ who cannot service a monthly payment and want tax-free income against equity.
For adults still earning income, HELOCs deliver equity access at a fraction of the total cost of a reverse mortgage over any meaningful time horizon. Reverse mortgages earn their keep specifically for retirees who cannot qualify for a HELOC due to income and who need tax-free income against equity to fund their retirement. Consider a reverse mortgage last, after evaluating HELOC, downsizing, and HEI options, and always with HUD counseling.
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