HELOC vs. reverse mortgage

Both turn home equity into available cash. They work almost opposite ways on payments and qualifying.

Reviewed by Shawn Way, NMLS #1007298★ 4.9 from 111 reviewsUpdated October 28, 2026

Side by side

Details: how reverse mortgages work · HELOCs for retirees.

Example: a 70-year-old with a $700,000 paid-off home

A HELOC could open a large line, but needs income for a payment on any balance. A HECM gives access to a share of value set by age and rates, with no required monthly payment, and the unused portion grows over time. For a retiree on a fixed income who wants to stay in the home, that difference often decides it.

Costs compared

• HELOC: closing costs often $0–$1,000; interest on what you draw; monthly payments required.
• HECM reverse mortgage: an upfront FHA mortgage insurance premium of 2% of the home's value (up to the HECM limit), an annual premium of 0.5% of the balance, origination fees capped by FHA rules, and standard closing costs. No monthly mortgage payment is required, but interest and insurance are added to the balance.

What you must still do with a reverse mortgage

• Live in the home as your primary residence.
• Pay property taxes, homeowners insurance and any HOA dues on time.
• Keep the home in good repair.

Falling behind on taxes or insurance can make a reverse mortgage come due. Lenders check that you can afford these costs before approving, and may set aside part of the loan to pay them.

What happens for your heirs

With a HELOC, heirs must pay off or refinance the balance, usually from a sale. With a HECM, the loan is due when the last borrower leaves; heirs can sell or pay it off, and because the loan is non-recourse, they never owe more than the home is worth (or 95% of its appraised value if they keep it). HELOCs when a borrower dies.

The HECM line of credit grows

The unused part of a HECM line of credit grows over time at the loan's rate plus the annual insurance premium. Opened early and left unused, it can be worth considerably more years later. A HELOC line doesn't grow, and can be frozen if values fall.

A second example: a 66-year-old still working

A 66-year-old with a $650,000 home and a $150,000 mortgage still works part-time and plans to stop at 70. She needs $40,000 for a roof and a car. A HELOC qualifies on her current income at low cost, and she can pay it off before retiring. A reverse mortgage would pay off her $150,000 mortgage and remove that payment, but upfront costs and the growing balance make it more expensive for a short-term need. She chooses the HELOC now and plans to revisit a reverse mortgage at 70 if she wants to eliminate her mortgage payment.

Also asked

Which costs less upfront, a HELOC or a reverse mortgage?

A HELOC costs far less upfront. HECM reverse mortgages carry an upfront FHA insurance premium of 2% of the home's value up to the limit, plus origination and closing costs, while HELOC closing costs are often $0–$1,000.

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• HELOC vs. home equity loan
• HELOC vs. 401(k) loan
• HELOC vs. credit card
• Paying off your mortgage with a HELOC
• HELOC or home equity loan for debt consolidation?
• Paid-off home: HELOC or cash-out refinance?
• HELOC vs. personal line of credit

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