If you are 62 or older and sitting on significant home equity, two options dominate the conversation: a reverse mortgage (most commonly an FHA-insured HECM) and a home equity line of credit (HELOC). Both turn equity into usable cash. They behave very differently after closing.
Quick answer
A HELOC is cheaper up front and better for short-term borrowing you can repay quickly. A reverse mortgage costs more to set up but requires no monthly mortgage payment, cannot be frozen or reduced by the lender, and has a credit line that grows over time — which is why it usually wins for retirees on a fixed income.
Side-by-side comparison
- Monthly payments: HELOC requires monthly interest payments (and principal after the draw period). A reverse mortgage requires none — you stay responsible for property taxes, insurance, and upkeep.
- Age requirement: HELOC has none. HECM requires the youngest borrower to be 62+.
- Line stability: Lenders can freeze or reduce a HELOC (many did in 2008 and 2020). An open HECM line of credit cannot be frozen or cancelled as long as you meet loan obligations.
- Growth: An unused HECM credit line grows at the loan rate plus the mortgage insurance rate. A HELOC line never grows.
- Term: HELOCs typically have a 10-year draw then a repayment period with payment shock. A reverse mortgage has no maturity date while you live in the home.
- Repayment trigger: HELOC is due on schedule. A reverse mortgage becomes due when the last borrower sells, moves out permanently, or passes away.
- Non-recourse: Non-recourse loan: when the loan is repaid, you or your heirs won't owe more than the home's value at that time. Heirs who keep the home pay the loan balance or 95% of the appraised value, whichever is less. You still pay property taxes, insurance and upkeep, and live in the home. A HELOC is full-recourse.
- Counseling: HECM requires independent HUD-approved counseling. HELOC does not.
Repayment terms
This is the single biggest difference. A HELOC has a defined draw period (usually 10 years) with interest-only payments, followed by a 10–20 year amortizing repayment period where payments can double or triple. Miss those payments and the lender can foreclose.
A reverse mortgage has no required monthly principal or interest payment for as long as you live in the home as your primary residence and keep taxes, insurance, and maintenance current. Interest accrues onto the balance, and the loan is settled when the home is sold or transferred. Heirs can repay the balance or 95% of appraised value, whichever is less, and keep any remaining equity.
Credit requirements
- HELOC: traditional underwriting. Expect a credit score around 680+, documented income, and a debt-to-income ratio typically under 43%. Retirees who stopped drawing a paycheck often struggle here even with millions in equity.
- Reverse mortgage: no minimum credit score requirement. Instead FHA requires a financial assessment that reviews property-charge payment history and residual income to confirm you can cover taxes and insurance. Past credit blemishes may result in a Life Expectancy Set-Aside (LESA) rather than a denial.
Total costs
- HELOC: low or waived closing costs, sometimes an annual fee, and a variable rate that can move with the prime rate. Cheap to open, but every dollar drawn creates a monthly obligation.
- Reverse mortgage: an upfront FHA mortgage insurance premium (2% of the home value up to the FHA limit), origination, and third-party closing costs, plus ongoing annual MIP of 0.5% on the balance. See our full costs breakdown.
- The tradeoff: HELOCs cost less to start and more each month; reverse mortgages cost more to start and nothing each month. Over a long retirement in the home, the cash-flow math usually favors the reverse mortgage. Over two or three years, it usually favors the HELOC.
When a HELOC makes more sense
- You are under 62.
- You need a small amount for a short, defined period and have the income to repay it quickly.
- You plan to sell the home within a few years, so upfront reverse mortgage costs would not amortize well.
- You still have strong W-2 or business income and want the lowest closing costs.
When a reverse mortgage makes more sense
- Cash flow is the problem — a required monthly payment would strain your budget.
- You want a standby line of credit that grows and cannot be frozen.
- You intend to stay in the home long term.
- You want to pay off an existing mortgage or HELOC and eliminate that payment.
- You want non-recourse protection for your heirs.
A common California strategy
Many California homeowners use a HECM to retire an existing HELOC that is about to enter its repayment period. That converts a rising monthly obligation into no required payment, while any remaining proceeds sit in a growing line of credit for future needs. With California home values, borrowers above the FHA lending limit may also compare a proprietary jumbo reverse mortgage — see our loan options.
Frequently asked questions
Is a reverse mortgage more expensive than a HELOC?
Up front, yes. Over time it can cost less in cash-flow terms because nothing is due monthly and the HELOC repayment period is avoided.
Can I have both a reverse mortgage and a HELOC?
No. A HECM must be in first lien position, so an existing HELOC is paid off at closing.
Does a HELOC or reverse mortgage require good credit?
A HELOC does. A reverse mortgage has no minimum score — only a financial assessment of your ability to pay property charges.
Can my heirs keep the home?
Yes. Heirs can repay the loan balance or 95% of appraised value, whichever is less, or sell and keep any remaining equity.
How much could I qualify for?
It depends on your age, home value, and current rates. Run the numbers with our free reverse mortgage calculator, or talk to a specialist.
Educational information only. Not a loan offer or commitment. NMLS #855360. Equal Housing Lender.
