Reverse Mortgage vs HELOC for Seniors: Complete 2026 Comparison
No monthly payments vs lower ratesâwhich home equity strategy works for your retirement?
By Mo Abdel, NMLS #1426884 | Lumin Lending NMLS #2716106 | Updated January 2026
For homeowners 62 and older, both reverse mortgages (HECM) and HELOCs provide access to home equityâbut they work in fundamentally different ways. A reverse mortgage eliminates monthly payments entirely, with the loan repaid when you leave the home. A HELOC offers lower interest rates but requires monthly payments that may strain fixed retirement income. The right choice depends on your income stability, how long you plan to stay in your home, and whether payment flexibility or rate savings matters more.
Reverse Mortgage vs HELOC: Quick Comparison
| Feature | Reverse Mortgage (HECM) | HELOC |
|---|---|---|
| Age Requirement | 62+ | None |
| Monthly Payments | None required | Required |
| Interest Rates | Higher (variable or fixed) | Lower (usually variable) |
| Income Qualification | Not required | Required |
| Credit Requirements | Flexible | 680+ typically |
| Loan Repayment | When you leave home | Monthly + end of term |
| Upfront Costs | Higher (MIP, origination) | Lower |
| Non-Recourse | Yes (FHA insured) | No |
| Counseling Required | Yes (HUD-approved) | No |
| Line Freeze Risk | No | Yes (lender discretion) |
How Each Product Works
Reverse Mortgage (HECM)
A Home Equity Conversion Mortgage (HECM) is a federally-insured loan that converts home equity into cash without requiring monthly payments:
- Access options: Lump sum, monthly payments, line of credit, or combination
- No payments due: Loan balance grows over time with interest
- Repayment trigger: When last borrower leaves home (sale, death, or move)
- Non-recourse protection: Never owe more than home value
- FHA insurance: Guarantees loan availability and non-recourse protection
HELOC (Home Equity Line of Credit)
A HELOC is a revolving credit line secured by your home equity with required monthly payments:
- Draw period: 5-10 years to access funds
- Repayment period: 10-20 years of principal + interest payments
- Variable rates: Tied to prime rate, fluctuates with market
- Payment required: Interest-only during draw, full payments during repayment
- Income qualification: Must prove ability to make payments
Payment Requirements: The Critical Difference
For seniors on fixed income, payment requirements often determine which product makes sense.
Reverse Mortgage: No Monthly Payments
- No mortgage payment required during loan term
- Must maintain property taxes and homeowners insurance
- Must keep home in reasonable repair
- Interest accrues and adds to loan balance
- Entire balance due when leaving home
HELOC: Ongoing Payment Obligation
- Draw period (years 1-10): Interest-only payments required
- Repayment period (years 11-20): Principal + interest payments
- Payment shock: Payments increase significantly when draw period ends
- Example: $100,000 balance at 8.5% = $708/month interest-only, then $985/month during repayment
Payment Reality Check
A senior drawing $150,000 from a HELOC at 8.5% faces $1,062/month in interest-only payments during the draw periodâ$12,750 annually. On a fixed Social Security income, this payment obligation can quickly become unsustainable.
Interest Rate Comparison
HELOCs typically offer lower rates, but this advantage must be weighed against payment requirements.
| Product | Typical Rate Range | Rate Type |
|---|---|---|
| HELOC | Prime + 0.5-2% (8-10%) | Variable |
| HECM Variable | Prime + 1-3% (9-11%) | Variable |
| HECM Fixed | 9-11% | Fixed |
The Rate vs. Payment Trade-off
Lower HELOC rates come with required payments. Higher reverse mortgage rates come with no payments. Over time, the interest cost of a reverse mortgage may be higher, but for seniors who cannot afford HELOC payments, this comparison is irrelevantâthey can only access one product.
Qualification Differences
Reverse Mortgage Qualification
- Age: 62+ (youngest borrower)
- Home equity: Sufficient equity to fund loan
- Property: Primary residence, eligible property type
- Income: Not required for loan qualification
- Credit: No minimum score, but payment history reviewed
- Financial assessment: Ability to pay taxes/insurance (may require set-aside)
- Counseling: HUD-approved counseling required
HELOC Qualification
- Age: 18+ (no senior-specific requirement)
- Home equity: Typically 15-20% minimum remaining after HELOC
- Property: Primary, secondary, or investment
- Income: Must qualify based on debt-to-income ratio
- Credit: Typically 680+ for best terms
- Employment: Stable income source required
- Counseling: Not required
Income Qualification Challenge
Many retirees on Social Security and pension income cannot qualify for HELOCsâtheir fixed income doesn't meet lender debt-to-income requirements. Reverse mortgages have no income qualification, making them the only option for these homeowners.
When to Choose a Reverse Mortgage
A reverse mortgage is typically better when:
- Fixed income: Social Security, pension, or limited retirement income
- Cannot afford payments: Monthly HELOC payments would strain budget
- Long-term stay: Plan to remain in home for 10+ years
- No income qualification: Cannot meet HELOC income requirements
- Supplementing retirement: Need ongoing monthly income
- Paying off existing mortgage: Want to eliminate current payment
- Line of credit growth: HECM line grows over time (unique feature)
- Non-recourse protection: Want guarantee of never owing more than home value
When to Choose a HELOC
A HELOC may be better when:
- Strong income: Can comfortably afford monthly payments
- Short-term need: Plan to repay within 5-10 years
- Rate sensitivity: Lower rate is top priority
- Selling soon: Plan to sell home in near future
- Preserving equity: Want to minimize interest accumulation
- Under 62: Not yet eligible for reverse mortgage
- Temporary bridge: Need funds until other assets become available
Risks of Each Option
Reverse Mortgage Risks
- Equity erosion: Loan balance grows over time, reducing inheritance
- Higher costs: Upfront MIP and origination fees
- Complexity: More complicated than traditional loans
- Spouse protection: Non-borrowing spouse rules require attention
- Tax/insurance obligation: Must maintain or face default
HELOC Risks
- Payment risk: Must make payments or face foreclosure
- Rate risk: Variable rates can increase significantly
- Line freeze: Lender can reduce or freeze credit line
- Payment shock: Draw period to repayment transition
- Income requirement: Job loss or income reduction affects qualification
- Recourse: Personally liable for full balance if home sells short
Frequently Asked Questions
What is the main difference between a reverse mortgage and HELOC for seniors?
The main difference is payment requirements. A reverse mortgage (HECM) requires no monthly paymentsâthe loan balance grows over time and is repaid when you leave the home. A HELOC requires monthly payments from the start, which can strain fixed retirement incomes.
Which has lower interest rates, reverse mortgage or HELOC?
HELOCs typically have lower interest rates than reverse mortgages. However, HELOCs require monthly payments that may not be sustainable on retirement income. Reverse mortgages have higher rates but no required payments during the loan term.
Can I lose my home with a reverse mortgage or HELOC?
Both are secured by your home. With a HELOC, missed payments can lead to foreclosure. With a reverse mortgage, you cannot be foreclosed for non-payment (there are no payments), but you must maintain property taxes, insurance, and home maintenance. Reverse mortgages offer more foreclosure protection for seniors.
What age do you need to be for a reverse mortgage vs HELOC?
Reverse mortgages (HECM) require at least one borrower to be 62 or older. HELOCs have no age requirement but do require sufficient income to qualify for monthly paymentsâwhich many retirees on fixed income cannot demonstrate.
Do I need income to qualify for a reverse mortgage?
Reverse mortgages have no income requirements for loan qualificationâyou don't need to prove ability to make monthly payments because there are none. You only need to demonstrate ability to pay property taxes and insurance. HELOCs require full income qualification.
What happens to a reverse mortgage or HELOC when I die?
With both products, heirs inherit the home subject to the loan balance. They can pay off the loan and keep the home, sell the home and keep any equity above the loan balance, or walk away. HECM reverse mortgages are non-recourseâheirs never owe more than the home's value, even if the loan balance exceeds it.