Reverse Mortgage vs. HELOC vs. Home Equity Loan
All three let you borrow against your home. The right comparison starts with how much you need, how you will repay it, and whether the payments fit your budget.
Here, “reverse mortgage” means the FHA-insured Home Equity Conversion Mortgage (HECM). It is not a comparison of every private reverse mortgage product.
Write down the problem you want the money to solve before looking at offers. A one-time repair, a temporary expense, and an ongoing shortfall call for different questions.
Start with the monthly payment
A HECM generally does not require monthly principal-and-interest payments while you meet its terms. Taxes, insurance, and home maintenance remain your responsibility. The unpaid loan balance can grow as charges are added.
Home equity loans and HELOCs require payments under their agreements. If you already have a mortgage, a second loan may add another payment rather than replace the first. CFPB comparison of home equity loans and HELOCs.
Ask each lender to show the payment alongside your existing housing expenses. Use your actual take-home income and ordinary bills. Do not leave groceries, utilities, or a repair allowance out of the comparison just because they are not part of the loan.
How you receive and repay the money
| Loan | How money is available | What to check about repayment |
|---|---|---|
| HECM reverse mortgage | Available plans may include a lump sum, advances, or a credit line | When the loan becomes due, how the balance grows, and obligations for staying in the home |
| Home equity loan | Usually a single lump sum | Payment amount, rate, term, and whether the payment can change |
| HELOC | Repeated draws up to an approved limit during a draw period | Payments during the draw period and what changes when repayment begins |
A HELOC usually has a variable interest rate. A home equity loan may have a fixed or adjustable rate; read the offer rather than relying on the product name. CFPB explanation of the two products.
For a HECM, the amount available depends on program factors including age, rates, and property value. HUD’s program overview explains those factors. Having equity alone does not establish approval.
Compare the costs and risks
Each option uses the home as security. The comparison needs to include what happens if you cannot meet the agreement, not just how quickly you receive money.
For a HECM, consider upfront charges and the effect of a growing balance on future choices. For a HELOC, ask the lender to illustrate a higher interest rate and the payment after the draw period ends. For a home equity loan, ask for the total scheduled repayment and every fee.
The FTC’s reverse mortgage guide discusses comparing loan types, costs, and alternatives. Our cost guide gives you a list of figures to request for a HECM quote.
Keep the comparison fair: use the same borrowing amount and expected time in the home. If one quote assumes an immediate lump sum and another assumes small withdrawals over years, ask for a second illustration with matching assumptions.
Bring these questions to a counselor or lender
- What is the smallest amount that solves the problem?
- Can I afford the required payments if another expense rises?
- Am I likely to move before the loan’s upfront costs make sense?
- What happens if a spouse dies or someone needs long-term care?
- Would savings, a smaller project, assistance programs, or moving be worth considering?
There is no automatic winner. Ask for an explanation you can repeat in your own words, and take time to compare written terms. A HUD-approved counselor can help with the HECM discussion; use HUD’s counseling resources to find one.
If you are still deciding whether to borrow at all, read when a reverse mortgage may fit and when it may not.