A HELOC is a credit line you pay on every month, while a reverse mortgage lets homeowners 62 and older borrow against the house with no monthly loan payment as the balance grows. If you can handle a payment, the HELOC is usually the cheaper way to borrow. If you can’t, and you plan to stay put for a long time, the reverse mortgage is the one built for that.
Our take: Both use your home as collateral, and both can cost you the house if you stop paying the bills tied to it. The real question is whether you want a monthly payment now or a bigger balance later. A HELOC depends on your income and credit. A reverse mortgage depends mostly on your age, your equity and the home.
Reverse mortgage vs HELOC at a glance
Here’s the side by side. The reverse mortgage column describes a Home Equity Conversion Mortgage (HECM), the federally insured kind that most reverse mortgages are.
| Feature | HELOC | Reverse mortgage (HECM) |
|---|---|---|
| Who can get one | Any homeowner who qualifies on credit, income and equity | Homeowners 62 and older who live in the home as their main residence |
| Monthly loan payment | Yes. Often interest only during the draw period, then principal and interest | None while you live in the home |
| What you qualify on | Credit score, income, debt and equity | Age, equity, the home’s value and the interest rate, plus a financial assessment |
| How you get the money | Draw as needed up to your limit during the draw period | Line of credit, monthly payments, a single lump sum, or a mix |
| What happens to the balance | Goes down as you pay it | Goes up every month as interest and fees are added |
| When it’s due | On a set schedule, often over 10 or 20 years after the draw period | When the last borrower or eligible spouse sells, moves out or dies |
| Can the line shrink? | Yes. A lender may freeze or cut new draws if your finances change | An unused HECM line of credit grows over time |
| Big upfront costs | Varies by lender. Some charge little, some charge origination and closing costs | Origination up to $6,000, an upfront FHA premium, and closing costs |
| Required counseling | No | Yes, with a HUD-approved HECM counselor |
| What heirs could owe | The full balance | No more than 95% of the appraised value if the balance passes the home’s value |
HECM figures come from the CFPB and HUD. HELOC terms are set by each lender, so they vary.
How a HELOC works
A HELOC works like a credit card backed by your house. You get a limit, you borrow what you need during the draw period, and you pay interest only on what you’ve used. The CFPB’s HELOC explainer says the rate is usually variable, so the payment can move even if you don’t borrow another dollar.
But then the draw period ends.
You can’t borrow anymore, and the repayment period starts, often over 10 or 20 years. Payments are often much higher at that point because principal kicks in. U.S. Bank warns that the monthly payment may increase substantially when you go from interest only to principal plus interest. Some lenders want the whole balance paid as soon as the draw period ends, so read the agreement for a balloon payment.
One more catch that matters in retirement: a lender can freeze new draws if it thinks you can’t keep up.
So a HELOC you’re counting on as an emergency fund may not be there when you need it.
Want to see what a payment looks like? Our $100,000 HELOC payment breakdown runs the numbers at several rates and terms.
How a reverse mortgage works
With a reverse mortgage, you borrow against your equity and don’t make a monthly loan payment. Interest and fees get added to the balance each month, so what you owe goes up, and your equity goes down. the CFPB puts it bluntly: it isn’t free money.
You still have to pay property taxes and homeowners insurance, keep the home in good repair, and live there as your main home.
Fall behind on those and the loan could come due. That could lead to foreclosure.
At a glance: For 2026, HUD’s limit on the home value a HECM can be based on is $1,249,125 for FHA case numbers assigned on or after January 1, 2026. How much you could actually borrow depends on your age, the interest rate and the home’s value. The older you are, the more you can borrow.
You pick how the money comes out.
A line of credit charges interest only on what you use, and the unused part grows over time. Monthly payouts help with day-to-day bills. A single lump sum usually gives you less money, and you pay interest on all of it right away. Whatever you pick, there are limits on how much you can take in the first year.
Before you can apply, you have to meet with a HUD-approved HECM counselor. Honestly, that’s a good thing. The CFPB’s reverse mortgage checklist says to tell the counselor everything about your situation.
The loan comes due when the last borrower, co-borrower or eligible spouse sells, moves out or dies. Most families sell the home to pay it off. Anyone living there who isn’t a co-borrower or eligible spouse would have to move out or repay the loan, so if you live with a partner, applying together usually makes sense.
What each one costs
The HELOC’s main cost is interest, and you pay it as you go. Fees depend on the lender, and they can include closing costs, an annual fee or a charge for closing the line early.
The reverse mortgage front-loads more. The CFPB’s reverse mortgage cost breakdown lists an origination fee of $6,000 or less, third-party closing costs, an upfront mortgage insurance premium paid to the FHA, and an annual premium of 0.5% of the outstanding balance. HUD set the upfront premium at 2% of the maximum claim amount.
What does that look like on a real house? On a $400,000 home, a 2% upfront premium is $8,000. Add an origination fee of up to $6,000 and you could be near $14,000 before appraisal, title and recording costs.
And most of that usually gets rolled into the loan, so it grows with interest too.
| Cost | HELOC | Reverse mortgage (HECM) |
|---|---|---|
| Interest | Variable rate on what you’ve drawn, paid monthly | Added to the balance each month |
| Origination | Set by the lender | $6,000 or less |
| Mortgage insurance | None | 2% upfront, then 0.5% of the balance each year |
| Closing costs | Set by the lender | Appraisal, title, survey, inspection and recording fees |
| Counseling | None | A reasonable fee may apply, and the agency can’t charge one you can’t afford |
Each HELOC lender sets its own fees, so ask for the full fee list before you apply.
Bottom line on cost: the CFPB says a home equity loan or HELOC might be a cheaper way to borrow against your equity. You trade that savings for a monthly payment that depends on your income and credit.
Do taxes change the math? Not much. For the 2025 tax year, {IRS} says HELOC interest is deductible only if the money is used to buy, build or substantially improve the home that secures it, on up to $750,000 of mortgage debt ($375,000 if married filing separately). It also says interest accrued on a reverse mortgage is treated as home equity debt interest and isn’t deductible.
Which one fits your situation
Start with the payment. Everything else follows from that.
| If this sounds like you | Better fit | Why |
|---|---|---|
| You’re under 62 | HELOC | A HECM isn’t available yet |
| You have steady income and can handle a payment | HELOC | Usually cheaper, and the balance goes down instead of up |
| You need money for a few years, then plan to sell | HELOC | A reverse mortgage is an expensive way to cover short-term needs |
| You’re retired, cash is tight and a payment would strain you | Reverse mortgage | No monthly loan payment while you live there |
| You want a backup line that won’t get frozen | Reverse mortgage line of credit | The unused HECM line grows over time |
| You want to leave the house to your kids free and clear | Neither, or borrow as little as possible | Both put a lien on the home |
| You may move into assisted living soon | Probably neither | A HECM comes due once you move out |
If you’re in your 60s and leaning toward a HECM, the CFPB says it’s usually best to wait. Borrowing too soon can leave you short later in life. Our guide to a HELOC for seniors covers how lenders look at retirement income.
HELOC is better for
- People with steady income who can make the payment
- Short-term needs like a repair or a bridge to a home sale
- Keeping more of the equity for later or for heirs
- Borrowers under 62
Reverse mortgage is better for
- Homeowners 62 and up who plan to stay a long time
- Retirees who can’t take on a monthly payment
- People who want a credit line that grows if they leave it alone
- Couples who apply together so the survivor can stay
When neither one is the answer
Sometimes the better move isn’t a loan at all. The CFPB lists a few: refinance into a lower monthly mortgage payment, look into state and local programs that defer property taxes or help with repairs, or sell and move somewhere cheaper.
There’s also a home equity investment. It’s a different product, with no monthly payments during the term, and you settle the investment later through a sale, a refinance or savings. Hometap could be an option if you have at least 25% equity in your home, a FICO score of 575 or higher and the property is located in an eligible state, among other qualifying criteria. The term is 10 years, so it works best when you already know how you’d settle.
We compare those in HEI vs HELOC and in our list of HELOC alternatives with no monthly payment.
How to decide, step by step
- Write down the monthly payment you could make. If the honest answer is zero, a HELOC is probably off the table.
- Decide how long you’ll stay. Moving in a few years points toward a HELOC or selling. Staying for good points toward a HECM.
- Talk it over with family. A reverse mortgage changes what heirs get and who can stay in the home.
- Get HELOC quotes. Ask each lender for the APR, every fee, the draw and repayment terms, and whether there’s a balloon payment.
- If you’re 62 or older, book HECM counseling. You need it before you apply anyway, and it’s the best place to get the numbers on your own home.
- Compare the total cost, not just the payment. Line up what you’d owe in 5 and 10 years under each option.
See what Figure offers before you pick a lender.
Reverse mortgage vs HELOC: bottom line
If you can make a payment, get HELOC quotes first. It usually costs less, and your equity goes up as you pay it down.
If you’re 62 or older, plan to stay for good and a payment would squeeze your budget, a HECM is built for exactly that. Just know the balance grows every month and the house has to cover it in the end.
Go with a HELOC if you have steady income, can handle a payment that may rise when the draw period ends, and want to keep as much equity as you can. Look at a reverse mortgage if you’re 62 or older, plan to stay in the home for a long time and need cash without a monthly payment.
Reverse mortgage vs HELOC questions
It depends on whether you can make a monthly payment. A HELOC is usually cheaper and the balance goes down as you pay it. A reverse mortgage has no monthly loan payment for homeowners 62 and older, but the balance grows every month and the upfront costs are higher.
Usually not on the same home. A HECM has to be the main loan on the property, so an existing mortgage or HELOC is typically paid off at closing, often with money from the reverse mortgage itself.
There’s no monthly loan payment, but you still pay property taxes, homeowners insurance and upkeep, and you have to live in the home as your main residence. Falling behind on those could make the loan come due.
The loan comes due when the last borrower or eligible spouse dies, sells or moves out. Most heirs sell the home to pay it off. If the balance is more than the home is worth, heirs who want to keep it won’t have to pay more than 95% of the appraised value.
Yes. A lender can freeze or reduce new draws if your finances change and it doubts you can make the payments. An unused HECM line of credit works the other way and grows over time.
It depends on your age, the interest rate and your home’s value. For 2026, the most home value a HECM can be based on is $1,249,125. The older you are, the more you can usually borrow.
For the 2025 tax year, HELOC interest is deductible only if you used the money to buy, build or substantially improve the home securing the loan. The IRS treats interest accrued on a reverse mortgage as home equity debt interest, which isn’t deductible.
How we put this together
This guide is Banks Done Right’s editorial view, built on primary sources. Reverse mortgage rules come from the Consumer Financial Protection Bureau and HUD, including HUD’s 2026 HECM limit and its mortgage insurance rules. HELOC basics come from the CFPB and lender pages, and the tax points come from IRS Publication 936 for the 2025 tax year.
We didn’t quote any interest rates, because HELOC and HECM rates change often and depend on the borrower. The $400,000 cost example is our own math using HUD’s 2% upfront premium and the CFPB’s $6,000 origination cap.
Sources
- CFPB: What is a reverse mortgage?
- CFPB: What are the costs associated with a reverse mortgage?
- CFPB: What happens if my reverse mortgage balance grows larger than my home’s value?
- CFPB: Considering a reverse mortgage?
- CFPB: What is a home equity line of credit?
- HUD: FHA announces 2026 loan limits
- HUD: Mortgagee Letter 2017-12, HECM mortgage insurance premiums
- IRS: Publication 936 (2025), Home Mortgage Interest Deduction
- U.S. Bank: HELOC end of draw period
Keep reading
Rules, limits and lender terms change. Check the current terms with the lender or a HUD-approved counselor before you apply.