Both let older homeowners borrow against their equity without selling, but the rules on payments, qualifying and repayment point in opposite directions. Here is how the two options compare.
If you are 62 or older with substantial home equity, two borrowing options come up often: a home equity line of credit and a reverse mortgage. Both use the house as collateral and let you get cash without selling, but beyond that they work in nearly opposite ways.
How Each Loan Works
A HELOC is a revolving line of credit. During a draw period, which could last 10 years, you can borrow, repay and borrow again up to your limit, often using special checks or a credit card. Paying the balance down replenishes your available credit. If you already have a mortgage, the HELOC is generally a second mortgage paid on top of it.
The most common reverse mortgage is the Home Equity Conversion Mortgage, or HECM, insured by the Federal Housing Administration and available only through FHA-approved lenders. Instead of paying the lender each month, you receive money as a lump sum, a line of credit, monthly payments or a combination. Interest and fees are added to the balance each month, so what you owe grows while your equity shrinks.
Qualifying: Age, Credit and Counseling
The qualifying gates are different in kind, not just in degree.
| Feature | HELOC | Reverse mortgage (HECM) |
|---|---|---|
| Minimum age | No program minimum beyond legal borrowing age | 62 or older for a borrower or eligible non-borrowing spouse |
| Qualifying factors | Credit, income, equity and lender underwriting | Age, equity, property eligibility, financial assessment and HUD-approved counseling |
| Monthly payments | Required under the credit agreement | None required, but taxes, insurance and upkeep are on you |
| Interest rate | Usually variable; some plans allow a fixed-rate conversion | Set at closing; the balance grows as interest and fees accrue |
A HECM borrower must have paid off a substantial amount of the mortgage, occupy the home as a principal residence and complete counseling with a HUD-approved counselor. Lenders also run a financial assessment covering property taxes and insurance. Qualifying for a HELOC depends on credit, income and available equity, which can be a hurdle on a fixed retirement income.
Payments, Costs and Obligations
With a HELOC, payments start right away. Many plans set minimum monthly payments based on your balance, and some require a minimum draw each time or an initial amount when the line opens. Payments often rise significantly once repayment begins, which may run over 10 or 20 years, and in some cases the full balance comes due right away.
A reverse mortgage flips this. There is no monthly mortgage payment, which is the main draw for homeowners with limited cash flow. The obligations do not disappear, though. You must pay property taxes and homeowners insurance, keep the house in good condition and live in it as your principal residence.
Careful
With either loan, the house is collateral. Miss payments or fall behind on taxes, insurance or upkeep, and you could lose the home.
The FTC notes that reverse mortgage fees can run higher than a home equity loan or HELOC, and HECM borrowers pay up-front and annual mortgage insurance premiums. How much you can borrow depends on the age of the youngest borrower, the interest rate and the home’s value. Reverse mortgage proceeds are typically tax-free and do not affect Social Security or Medicare, while HELOC interest is deductible only when the money buys, builds or substantially improves the home that secures it. See Can You Deduct Mortgage Interest? What Changed for 2026 for details.
Repayment and What Your Heirs Inherit
A HELOC follows a schedule no matter where you live.
A reverse mortgage is generally repaid when you die, sell the home or move out, usually through a sale. Title stays in your name, and your heirs keep any remaining profit from a sale. If they want to keep the house, they can repay the loan balance, or 95 percent of the appraised value if that is lower, or turn the property over to the lender. Because the HECM carries nonrecourse protections, a growing balance does not leave your estate owing more than the home supports. For how title and repayment actually work, see Does a Reverse Mortgage Really Take Your Home?.
Which Option Fits Which Situation
A HELOC may fit better if you have steady income, can manage required payments, want flexible access to funds and prefer lower up-front costs while preserving equity for yourself or your heirs. The trade-off is a variable rate and payments that can strain a budget if income drops.
A reverse mortgage may make sense if you are 62 or older, plan to stay in the home long term and want equity without a required monthly payment. The trade-off is a balance that grows every month and can use up much or even all of your equity, leaving less for a move to a smaller home, assisted living or an inheritance.
Before you sign anything, talk it through with a counselor. HUD-approved counseling is required before a HECM, and the information is free from HUD, so beware of anyone charging thousands of dollars for it. A counselor can also help if you are struggling with your mortgage, since other options may make better financial sense. To find a reverse mortgage counselor, search the HECM Counselor Roster or call HUD at (800) 569-4287; the CFPB connects borrowers with HUD-approved agencies at (855) 411-CFPB (2372).
Related guides
- HELOC or Home Equity Loan? How They Differ: how the lump-sum alternative works if a payment-based loan fits better.
- Getting Started With a HUD-Approved Housing Counselor: what to expect from the free session a reverse mortgage requires.
- Does a Reverse Mortgage Really Take Your Home?: how title, repayment and heirs work once the loan is in place.
The short version
- A HELOC requires monthly payments from day one, while a reverse mortgage for homeowners 62 and older has no required monthly principal-and-interest payment.
- Reverse mortgage interest and fees are added to the loan balance each month, so the balance grows and equity shrinks over time.
- HELOCs usually carry variable rates, and payments often rise once the draw period ends and repayment begins.
- A reverse mortgage is generally repaid when you sell, move out or pass away, usually through the sale of the home.
- Federally insured reverse mortgages require counseling with a HUD-approved counselor, which is available at no cost.
Readers also ask
Do I still own my home with a reverse mortgage?
Yes. The title stays in your name, just as with a traditional mortgage. You must keep paying property taxes and homeowners insurance, keep the house in good condition and live there as your principal residence.
Can a HELOC be frozen or reduced?
Yes. If your home’s value drops significantly or your financial circumstances change and the lender doubts you can make payments, it can freeze new draws or limit additional credit. That can leave you with less access to money than you planned.
Will a reverse mortgage affect my Social Security or Medicare?
Typically, the money you receive through a reverse mortgage is tax-free and does not affect Social Security or Medicare benefits. Your own tax situation can vary, so confirm details with a tax professional before you borrow.
What happens if the reverse mortgage balance exceeds the home’s value?
The federally insured Home Equity Conversion Mortgage carries nonrecourse protections, so heirs who sell the home generally are not obligated to pay more than the home is worth. Heirs can also repay the loan balance, or 95 percent of the appraised value if that is lower, to keep the home.
This guide is general information about U.S. mortgages, not financial, tax or legal advice. Loan terms depend on the lender and on your credit, income and property, so confirm the details with your lender, and see consumerfinance.gov for official guidance.
