HELOC vs. Reverse mortgage: What’s the right choice for you?

Quick Answer: Choosing between a HELOC and a reverse mortgage comes down to your income, goals, and how long you plan to stay in your home. A HELOC requires ongoing payments and allows you to borrow as needed, while a reverse mortgage delays repayment until the loan becomes due.

Your home may be one of your largest financial assets—but accessing that equity isn’t always straightforward. Two common options—a home equity line of credit (HELOC) and a reverse mortgage—work very differently, especially when it comes to repayment, eligibility, and flexibility.

Understanding how these options compare may help you decide which approach better fits your financial situation, goals, and plans for staying in your home. Here’s what you need to know.

What is a HELOC and how does it work?

A home equity line of credit (HELOC) is a revolving line of credit secured by your home. Instead of receiving a lump sum upfront, you may borrow against your available equity up to a set limit. You can even repay and borrow again during the draw period. This type of equity line of credit gives homeowners flexible borrowing options based on their available home value.

HELOCs typically have two phases:

• Draw period (often ~10 years): Borrow as needed; interest-only payments may be required
• Repayment period (often ~20 years): Begin paying back both principal and interest

HELOCs are often used for:

• Home improvements or renovation projects
• Ongoing repairs
• High-interest debt repayment or consolidation
• Other short-term or flexible expenses

With a HELOC loan, monthly payments are required. These payments may increase over time, especially since most HELOCs have variable interest rates. However, some lenders may offer fixed-rate options or rate-lock features. Some HELOCs may also include annual fees, depending on the lender.

To be eligible, lenders typically evaluate:

• Credit score (often 620 or higher)
• Verifiable income
• Debt-to-income (DTI) ratio
• Available home equity

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How does a reverse mortgage work? 

A reverse mortgage allows older homeowners to convert a portion of their home equity into cash. The most common type is a home equity conversion mortgage (HECM reverse mortgage), which is insured by the Federal Housing Administration (FHA), although some proprietary options may be available with different eligibility requirements.

Unlike a traditional loan, there are no required monthly mortgage payments. Instead, funds may be received as:

• Lump sum
• Line of credit
• Monthly installments
• A combination

The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

These reverse mortgage funds can be used to support living expenses or other financial needs, like:

• Increasing cash flow in retirement
• Covering healthcare expenses or living expenses
• Supporting aging in place for senior homeowners

The right to remain in the home is contingent on paying property taxes and homeowner’s insurance, maintaining the home, and complying with the loan terms.

→ Learn more: What is a reverse mortgage and how does it work?

To be eligible, borrowers must, at a minimum:

• Meet age requirement (typically 62+)
• Use the home as a primary residence
• Complete counseling approved by the U.S. Department of Housing and Urban Development (HUD)
• Continue paying property taxes and homeowners insurance
• Keep the home in good condition
• Maintain sufficient home equity

With a reverse mortgage:

• The loan balance grows over time as interest and fees are added
• Repayment is deferred until the home is sold, the borrower moves out, the borrower passes away, or the borrower no longer meets the loan terms
• The loan is non-recourse, meaning the borrower or their heirs will not owe more than the home’s value¹

For homeowners who may not meet the age requirement or who prefer to keep their existing mortgage, proprietary second-lien options such as HomeSafe Second may be another option to explore.

HELOC vs. reverse mortgage: How do they compare? 

Both HELOCs and reverse mortgages allow you to access your home equity, but they work in very different ways. This breakdown highlights how they differ in eligibility, repayment, costs, and long-term impact.

HELOC vs. reverse mortgage: Key differences

Feature	HELOC	Reverse mortgage
Age eligibility	18+	Typically 62+ for home equity conversion mortgages (HECMs); some proprietary options may be available to younger borrowers, depending on the lender
Credit and income requirements	Based on credit score, verifiable income, and DTI ratio	Financial assessment (evaluates income, credit, and ability to meet ongoing obligations)
Monthly payments	Required; may increase over time	No required monthly mortgage payments (borrowers must still meet loan obligations)*
Repayment structure	Payments required during the loan term; often interest-only during the draw period, followed by principal and interest	Repaid when the home is sold, or if the borrower moves out, passes away, or no longer meets loan requirements
Interest rate type	Typically variable; some fixed-rate options may be available	May be fixed or adjustable, depending on the loan structure and payout option
Disbursement options	Borrow as needed up to a set credit limit during the draw period	Lump sum, line of credit, monthly installments, or a combination
Impact on home equity	Equity decreases as you borrow but may rebuild as you repay the loan	Loan balance grows over time, which may reduce remaining equity
Closing costs	May include appraisal, origination, and possible annual or maintenance fees	May include origination fees, closing costs, and mortgage insurance premiums (for HECMs)
Non-recourse protection	Not typically non-recourse; borrower remains responsible for the full balance	Non-recourse loan; borrower or heirs do not owe more than the home’s value when the loan becomes due and the home is sold1
Common use cases	Home improvements, ongoing or flexible expenses, short-term borrowing needs	Increasing cashflow in retirement, covering healthcare costs, aging in place**

*The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

**The right to remain in the home is contingent on paying property taxes and homeowner’s insurance, maintaining the home, and complying with the loan terms.

To learn more, please visit the CFPB’s “Reverse Mortgage: A Discussion Guide.” 

HELOC vs. reverse mortgage: Eligibility requirements

Let’s take a closer look at how the eligibility requirements for these loan types differ.

HELOC eligibility requirements include:

• Credit score (often 620 or higher)
• Verifiable income
• DTI ratio
• Sufficient home equity

Reverse mortgage eligibility requirements include, at a minimum:

• Minimum age requirement (typically 62+ for HECMs; some proprietary options may be available to younger borrowers)
• Sufficient home equity
• Financial assessment (evaluates income, credit, and ability to meet ongoing obligations)
• Primary residence

HELOC vs. reverse mortgage: How proceeds are paid out

While both a HELOC and a reverse mortgage allow you to access home equity, they offer different levels of flexibility and payout structures.

Feature	HELOC	Reverse mortgage
Access to funds	Revolving credit line	Structured payouts based on loan terms
Disbursement options	Borrow as needed up to a set credit limit	Lump sum, line of credit, monthly installments, or a combination
Flexibility	Ongoing access during the draw period	Payout structure selected upfront, with some flexibility depending on the option chosen

HELOC vs. reverse mortgage: How repayment differs 

Repayment is one of the most important differences between a HELOC and a reverse mortgage. Each option follows a very different structure, which may affect your monthly budget and long-term financial planning.

Feature	HELOC	Reverse mortgage
Monthly payments	Required	No required monthly mortgage payments*
Payment structure	Payments may increase over time, especially with variable interest rates	No monthly payments; interest and fees are added to the loan balance over time*
When repayment occurs	Begins during the draw period and continues through the repayment period	Deferred until the home is sold, the borrower moves out, or the borrower no longer meets loan requirements

*The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

HELOC vs. reverse mortgage: Costs and fees

Costs and fees vary between HELOCs and reverse mortgages, and they may affect both your upfront expenses and long-term borrowing costs.

Feature	HELOC	Reverse mortgage
Interest rates	Typically variable; may change over time	May be fixed or adjustable, depending on the loan structure and payout option
Upfront costs	May include fees such as appraisal, origination, and possible annual or maintenance fees	May include origination fees, closing costs, and mortgage insurance premiums (for HECMs)
Ongoing costs	Interest accrues only on the amount borrowed, not the full credit limit	Interest and fees accrue over time, increasing the loan balance

HELOC vs. reverse mortgage: Impact on equity and heirs

How each option affects your home equity—and what that means for your heirs—is an important consideration, especially if leaving equity behind is a priority. HELOCs and reverse mortgages reduce equity in different ways over time and are repaid differently when the loan becomes due.

Feature	HELOC	Reverse mortgage
Impact on equity over time	Equity decreases as you borrow but may rebuild as you repay the loan	Loan balance grows over time, which may reduce remaining equity
Repayment at death or move-out	Loan is repaid from the home sale or other funds; remaining equity belongs to you or your heirs	Loan becomes due when the borrower sells, moves out, passes away, or no longer meets loan requirements
Options for heirs	Heirs may sell the home or keep it after paying off the remaining balance	Heirs may repay the balance, sell the home, or refinance to keep the property
Non-recourse protection	Not typically non-recourse; borrower or estate remains responsible for the full balance	Non-recourse loan; heirs do not owe more than the home’s value when the loan becomes due and the home is sold1

→ Read more: HELOC vs. HECM–Which is right for you?

Not sure where to start?

Our reverse mortgage specialists will be happy to help you.

Speak to a loan specialist

When a HELOC may be a better option 

A HELOC may be a good fit for homeowners who want flexible access to funds and are comfortable with making ongoing loan payments. It may be especially useful if you have regular income and plan to use the funds over a shorter period of time.

You might consider a HELOC if you:

• Have stable income to support ongoing monthly payments
• Are comfortable managing payments that may change over time
• Have a shorter time horizon for using and repaying the funds
• Have flexibility to borrow funds as needed rather than taking a lump sum

When a reverse mortgage may be a better option 

A reverse mortgage may be a good fit for homeowners who want to access home equity without taking on required monthly mortgage payments. It may be especially useful if your income is fixed or limited and you plan to remain in your home long term.

You might consider a reverse mortgage if you:

• Have fixed or limited income, where reducing monthly obligations is a priority
• Have a desire to reduce or eliminate required monthly mortgage payments
• Have long-term plans to remain in the home
• Have a need for predictable cash flow or flexible payout options

The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

HELOC vs. reverse mortgage: Examples

These examples illustrate how a HELOC vs. reverse mortgage decision may play out in real-life situations.

Carol, age 58, is still working full-time and has a steady income. She has built up significant equity in her home and is planning a series of home improvement projects over the next few years, including updating her kitchen and replacing her roof. Because the timing and costs of these projects may vary, she doesn’t want to take out a large lump sum all at once.

With strong credit, verifiable income, and comfort managing monthly payments, Carol considers a HELOC. The ability to borrow only what she needs, when she needs it, aligns with her plans. She also understands that her payments may change over time due to variable interest rates but feels confident managing that risk given her financial stability.

After weighing her options, Carol decides that a HELOC is the better fit. It gives her the flexibility to fund her projects gradually while maintaining control over how much she borrows and when.

Sue Ann, age 72, is retired and living on a fixed income from Social Security and a small pension. While she has built up substantial equity in her home, her monthly budget has become tighter due to rising healthcare costs and everyday expenses. She wants to access some of that equity to supplement her income, but is concerned about taking on additional monthly payments.

Because of these priorities, Sue Ann explores a reverse mortgage. She is particularly interested in receiving funds as a line of credit or monthly installments, which could help cover ongoing expenses while providing flexibility if unexpected costs arise. She also values that there are no required monthly mortgage payments, as long as she continues to meet her loan obligations, such as paying property taxes and maintaining her home.

After reviewing her options, Sue Ann decides that a reverse mortgage is a better fit. It allows her to access her home equity without adding to her monthly financial obligations, though she understands the loan balance will grow over time and may reduce the amount of equity remaining.

The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

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HELOC vs. reverse mortgage: Costs and risks to consider 

Both HELOCs and reverse mortgages come with potential costs and risks that may affect your financial situation over time. Understanding these trade-offs may help you choose the option that best aligns with your budget and long-term goals.

HELOC

• Variable interest rates that may change over time
• Monthly payments that may increase, especially if rates rise
• Foreclosure risk if payments are missed

Reverse mortgage

• Loan balance may increase over time
• Home equity may decrease over time
• Repayment may be required if certain conditions are met (such as moving out or selling the home)

How to choose between a HELOC and a reverse mortgage 

Choosing between a HELOC and a reverse mortgage often comes down to how each option fits your financial situation and long-term goals. If you’re asking, “Is a HELOC better than a reverse mortgage?”, the answer often depends on the following factors.

• Income stability:Do you have reliable income to support ongoing loan payments?
• Monthly payment tolerance: Are you comfortable making required monthly payments, or do you prefer to avoid them?
• Time in your home: Do you plan to stay in your home long term, or could your timeline change?
• Purpose of the funds: Are you funding a specific expense or looking for ongoing financial support?
• Available home equity: How much home equity do you have, and how might it affect your options or how much you may be able to borrow?

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What if neither option feels like the right fit?

If neither a HELOC nor a reverse mortgage fits your needs, other options may be available. Proprietary second-lien products, such as HomeSafe Second, allow you to access a portion of your home equity while keeping your existing mortgage in place.

As with any home equity solution, it’s important to understand how repayment works, along with any costs and requirements, to determine whether it aligns with your financial situation and goals.

Is a HELOC or reverse mortgage better after age 55? 

There’s no one-size-fits-all answer when choosing between a HELOC and a reverse mortgage. The right option depends on your financial situation, including your income, comfort with monthly payments, how long you plan to stay in your home, and your goals for the funds.

While both options allow you to access home equity, they differ in how funds are received, how repayment works, and how they may affect your long-term financial plans. Understanding these differences may help you make a more informed decision.

If you’re exploring your options, Finance of America can help you evaluate home equity solutions based on your age, income, and goals. You can also use our calculator to estimate how much you may be able to access based on your home value and location.

Not sure where to start?

Our reverse mortgage specialists will be happy to help you.

Speak to a loan specialist

FAQs 

Can you have both a HELOC and a reverse mortgage?

In most cases, a reverse mortgage must be the primary loan on the home. If you currently have a HELOC, it would typically need to be paid off using proceeds from the reverse mortgage at closing. After obtaining a reverse mortgage, taking out a new HELOC is generally not allowed.

Which is cheaper long term: a HELOC or a reverse mortgage?

There’s no single cheaper option. Costs depend on how much you borrow, interest rates, fees, and how long the loan is in place. A HELOC may have lower upfront costs but requires monthly payments, while a reverse mortgage may have higher upfront costs but no required monthly mortgage payments.

The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

How does repayment work for a HELOC vs. a reverse mortgage?

With a HELOC, you’re required to make monthly payments, which may change over time. With a reverse mortgage, there are no required monthly mortgage payments. The loan is typically repaid when the home is sold, you move out, pass away, or no longer meet the loan requirements.

The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

What happens if you move after taking out a HELOC or reverse mortgage?

If you move, both types of loans generally need to be repaid. With a HELOC, the remaining balance is due. With a reverse mortgage, moving out typically triggers repayment, often through the sale of the home.

Can you pay off a reverse mortgage early?

Yes. Reverse mortgages can be repaid at any time without prepayment penalties. Borrowers or their heirs may choose to pay off the loan balance early, for example, if they decide to sell the home or refinance.

Can I get a reverse mortgage if I’m under 62?

Most reverse mortgages, including HECMs, are available to borrowers age 62 and older. Some proprietary reverse mortgages may be available to younger borrowers, depending on the product and state.

How much equity do you need for a HELOC or reverse mortgage?

Both options require sufficient home equity, but the exact amount varies. HELOCs are typically based on combined loan-to-value (CLTV) limits, often allowing borrowing up to 80%–85% of the home’s value. Reverse mortgages also require significant equity, with the amount you can access depending on factors such as age, home value, and interest rates.

¹A non-recourse reverse mortgage transaction limits the homeowner’s liability to the proceeds of the sale of the home (or any lesser amount specified in the credit obligation).

Non-recourse means that you, or your estate, can’t owe more than the value of your home when the loan becomes due and the home is sold.

Non-recourse means that if you default on the loan, or if the loan cannot otherwise be repaid, the lender cannot look to your other assets (or your estate’s assets) to meet the outstanding balance on your loan.