Reverse Mortgage vs Home Equity Loan — Direct Comparison
| Factor | Reverse Mortgage | Home Equity Loan | HELOC |
|---|---|---|---|
| Monthly payments | None required | Required | Required |
| Income requirement | Ability to pay property costs | Debt-to-income ratio | Debt-to-income ratio |
| Age requirement | 62+ | None | None |
| Loan due | On sale, move, or death | At maturity (5–30 years) | At end of draw period |
| Upfront costs | High (3–5% of home value) | Lower (2–5% of loan) | Lower (0–2% + appraisal) |
| Interest | Accumulates (no payment) | Paid monthly | Paid monthly |
| Credit required | No minimum (but assessed) | Good credit needed | Good credit needed |
| Flexibility | Multiple payout options | Lump sum | Draw as needed |
You have reliable retirement income (pension, Social Security, investments) sufficient to cover monthly payments. You want to preserve more equity for heirs. Your timeline is specific — you need funds for a defined purpose and can repay. Your goal is lower total cost, not eliminating monthly payments.
Your income is insufficient or unreliable for monthly loan payments. Eliminating an existing mortgage payment is the primary goal. You want to stay in your home long-term without payment obligations. You're 70+ (older borrowers access a higher percentage of their equity through HECM).
Frequently Asked Questions
Not simultaneously on the same property. However, a HELOC that's fully paid off (or with a minimal balance) may be able to be paid off at reverse mortgage closing. Some seniors start with a HELOC while they're younger, then convert to a reverse mortgage at 62+ when the lack of monthly payments becomes more valuable.
It depends entirely on your income and goals. If you have reliable income and want flexibility at lower cost: HELOC. If you don't want monthly payments and want to stay in your home regardless of income: reverse mortgage. Many financial planners recommend exhausting HELOC options before a reverse mortgage due to the lower cost structure.