Both let you borrow against your home’s equity without selling. That’s where the similarity ends. A HELOC requires monthly payments from the first month. A reverse mortgage requires none. That single difference reshapes everything else, who qualifies, what it costs, how the balance behaves, and what your heirs inherit.

Neither is better. They solve different problems for different people, and choosing wrong is expensive.

HELOCs vs Reverse Mortgages: Which Fits Your Situation?

A HELOC is a loan you pay down. A reverse mortgage is a loan that grows. With a HELOC, your balance falls as you make payments. With a reverse mortgage, interest and fees add to the balance every month because you aren’t paying them.

That’s not a flaw in either product. It’s the design. But it means the two suit very different financial situations.

Side-by-Side Comparison

Feature HELOC Reverse Mortgage (HECM)
Minimum age 18 62
Monthly payment required? Yes — interest-only during draw No
Credit score Typically 620–680+ No minimum, but financial assessment required
Income verification Full — DTI usually capped near 43% Residual income test, not DTI
Balance over time Falls as you repay Grows as interest accrues
Can the lender freeze it? Yes — happened widely in 2008 and 2020 No — the line is guaranteed
Unused credit line Stays the same Grows over time
Recourse You owe the full balance Non-recourse — never more than the home’s value
Counseling required? No Yes — HUD-approved, before applying
Upfront cost $0 to 2% at many lenders 2% mortgage insurance premium plus origination
Ongoing insurance None 0.5% annually on the balance
When is it due? End of repayment period When the last borrower dies, sells, or leaves 12+ months
Occupancy Primary, second home, sometimes investment Primary residence only

Eligibility: Who Qualifies for Each

HELOC requirements

A HELOC is underwritten like any other loan. Lenders look at four things:

  • Credit score: generally 620 minimum, with the best pricing at 700 or above
  • Equity: most lenders cap combined loan-to-value at 80% to 85%, meaning you keep 15% to 20%
  • Debt-to-income ratio: typically 43% or below
  • Documented income: pay stubs, tax returns, or bank statements

This is where retirees often struggle. A homeowner with $600,000 in equity and $2,400 a month in Social Security may fail the DTI test despite being in excellent financial shape. The asset doesn’t count; only the income does.

For a full breakdown of how HELOC underwriting works, see our guide to understanding HELOC loans.

Reverse mortgage requirements

HECM eligibility works differently. There’s no credit score minimum and no DTI calculation. Instead:

  • Age 62 or older — all borrowers on title
  • Primary residence that you occupy
  • Substantial equity — typically 50% or more, though it varies by age
  • HUD-approved counseling completed before application
  • Financial assessment — a review introduced in 2015

The financial assessment is not a credit score test. It examines whether you’ve paid property taxes and insurance on time, your overall credit history, and your residual income — the cash left after your monthly obligations.

If you don’t pass cleanly, the lender may require a Life Expectancy Set-Aside — a portion of your loan funds reserved to pay property taxes and insurance. That reduces what you can access but protects you from the most common reason reverse mortgages fail.

How Much Can You Borrow?

HELOC: based on your home’s value minus what you owe, capped at 80% to 85% combined loan-to-value. On a $500,000 home with a $100,000 mortgage at 85% CLTV, you could access roughly $325,000.

Reverse mortgage: based on three factors — your age, your home’s value, and current interest rates. Older borrowers get more. A 62-year-old might access 40% to 50% of their home’s value; an 80-year-old considerably more.

One rule that surprises people: HECM limits you to roughly 60% of your available principal in the first year. The rest becomes available after twelve months. That rule exists to discourage large lump-sum withdrawals that leave nothing later.

The Feature Nobody Explains: The Growing Line of Credit

This is the most underappreciated difference between the two products.

If you take a HECM as a line of credit and don’t draw on it, the available amount grows over time — at the same rate charged on the loan balance. Not because your home appreciated. The credit line itself expands.

A HELOC does the opposite. Your available credit stays fixed, and it can be reduced or frozen by the lender if home values fall or your credit changes. That happened on a massive scale in 2008 and again during 2020, leaving homeowners without access they were counting on.

A HECM line of credit cannot be frozen, reduced, or canceled as long as you meet your obligations. That guarantee is why some financial planners recommend opening one early as a standby reserve — not to spend, but to have.

Benefits of a HELOC

Lower cost to open. Many credit unions and online lenders charge $0 in closing costs. A reverse mortgage’s 2% upfront mortgage insurance premium on a $500,000 home is $10,000 before any other fee.

You build equity back. Every principal payment reduces what you owe. Your equity recovers.

No age requirement. Available at any adult age.

Broader property eligibility. Second homes and some investment properties qualify with certain lenders.

You can walk away cleanly. Pay it off and close it. No lingering lien, no estate complications.

Risks of a HELOC

Payments start immediately. On a $100,000 balance at 7.43%, interest-only runs about $620 a month. For a retiree on fixed income, that’s a real obligation.

Payment shock at the end of the draw period. When the draw period closes, payments convert to principal plus interest and jump sharply — often by 50% or more. Our guide to interest-only HELOC repayment shows what that transition looks like across balance sizes.

The rate moves. HELOCs are tied to the prime rate. Your payment can rise, and with the Federal Reserve now leaning toward increases rather than cuts, the risk sits on the upside.

The lender can cut your access. Frozen and reduced lines are a documented pattern during downturns.

Foreclosure risk. Miss payments and you can lose the home — the same as any mortgage.

Benefits of a Reverse Mortgage

No monthly mortgage payment. This is the central benefit, and for a retiree with limited cash flow, it’s transformative.

Income and credit matter far less. No DTI test. No credit minimum. A homeowner with substantial equity and modest income can qualify when a HELOC is out of reach.

Non-recourse protection. You or your heirs will never owe more than the home is worth at the time of sale, even if the balance exceeds the value. FHA insurance covers the difference.

The guaranteed line of credit that grows. Covered above — no other product offers it.

Flexible payout options. Lump sum, monthly payments for life, monthly for a set term, a line of credit, or a combination.

You keep the title. A common myth is that the bank owns your home. It doesn’t. You remain on title with all ownership rights.

Risks of a Reverse Mortgage

The balance grows. Interest and insurance compound onto what you owe. Over fifteen years, the balance can substantially exceed what you received.

Your equity shrinks. That’s equity your heirs won’t inherit. If leaving the home to family matters, weigh this carefully and discuss it with them.

High upfront cost. The 2% upfront mortgage insurance premium plus origination and closing costs makes this an expensive product to open. It’s poorly suited to anyone who might move within a few years.

You can still lose the home. This is the most dangerous misconception. No monthly mortgage payment does not mean no obligations. You must continue paying property taxes, homeowners insurance, HOA dues, and maintenance. Fall behind and the loan becomes due — which can mean foreclosure.

Moving triggers repayment. If you leave the home for 12 consecutive months — including for extended medical care — the loan becomes due and payable.

Complications for heirs. When the last borrower dies, heirs have a limited window to pay off the balance, refinance, sell, or deed the property back. Timelines are short and require prompt action.

Which One Fits Your Situation?

Your situation Better fit
Under 62 HELOC — reverse mortgage isn’t available
Strong income, want to preserve equity HELOC
Need money short-term and will repay it HELOC
Planning to move within 5 years HELOC — reverse costs too much to open
Leaving the home to heirs is a priority HELOC
62+, limited income, can’t qualify for a HELOC Reverse mortgage
Monthly payment would strain your budget Reverse mortgage
Want a standby reserve that can’t be frozen Reverse mortgage line of credit
Plan to stay in the home permanently Reverse mortgage
62+, strong income, short-term need Run both — a HELOC is usually cheaper

If your income is the obstacle rather than your equity, it’s worth understanding how lenders treat retirement income before ruling out a HELOC — Social Security is typically grossed up, which raises your qualifying figure. See our guide to qualifying for a loan in retirement.

Before You Decide

Talk to a HUD-approved counselor. It’s required before a reverse mortgage anyway, and it’s free or low-cost. The counselor works for you, not a lender. Find one at hud.gov/findacounselor or call (800) 569-4287.

Include your family in the conversation. A reverse mortgage affects what your heirs inherit and what they’ll need to handle. Surprising them later helps no one.

Be skeptical of anyone who contacts you first. Unsolicited reverse mortgage pitches — mail, phone, or door-to-door — warrant particular caution. Legitimate lenders don’t need to chase you.

Never pay a fee for information. Counseling is free or low-cost through HUD-approved agencies. Anyone charging upfront for reverse mortgage “help” should be avoided.

If you already hold a reverse mortgage and are considering changes, see our guide to refinancing a reverse mortgage.

Frequently Asked Questions

Is a reverse mortgage better than a HELOC?

Neither is universally better. A HELOC costs less to open and lets you rebuild equity, but requires monthly payments and full income qualification. A reverse mortgage requires no payments and far less income, but costs more upfront and grows your balance over time. The deciding factors are usually your age, your monthly cash flow, and how long you plan to stay.

Can you get a HELOC at 70 years old?

Yes. There’s no maximum age for a HELOC, and age discrimination in lending is prohibited. What matters is whether you qualify on credit, equity, and income. Social Security and pension income both count, and because much of it is untaxed, lenders typically gross it up by 15% to 25% — which raises your qualifying income above the actual benefit.

Do you need good credit for a reverse mortgage?

There’s no minimum credit score. But since 2015, lenders conduct a financial assessment reviewing your history of paying property taxes and insurance, your overall credit, and your residual income. Weak results don’t automatically disqualify you — they may trigger a Life Expectancy Set-Aside, reserving part of your funds for property charges.

Can you lose your home with a reverse mortgage?

Yes. Despite having no monthly mortgage payment, you must keep paying property taxes, homeowners insurance, HOA dues, and maintaining the property. Falling behind on any of those can make the loan due and payable, which can lead to foreclosure. This is the most common way reverse mortgages go wrong.

What happens to a reverse mortgage when you die?

The loan becomes due and payable. Heirs generally have a defined window to respond and may pay the balance, refinance into a conventional loan, sell the property, or deed it back to the lender. Because HECMs are non-recourse, heirs never owe more than the home’s appraised value — even if the balance is higher. Contact the servicer promptly; timelines are short.

Does a reverse mortgage line of credit really grow?

Yes. Unused funds in a HECM line of credit increase over time at the same rate charged on the loan balance. This isn’t tied to home appreciation — the credit line itself expands. A HELOC does the opposite: the available amount stays fixed and can be reduced or frozen by the lender.

Which has lower closing costs?

A HELOC, by a wide margin. Many credit unions and online lenders charge nothing to open one. A reverse mortgage carries a 2% upfront mortgage insurance premium — $10,000 on a $500,000 home — plus origination and third-party fees. That cost makes reverse mortgages poorly suited to anyone who might move within a few years.

Can you have both a HELOC and a reverse mortgage?

Not on the same property at the same time. A HECM must be in first lien position, so any existing HELOC or mortgage gets paid off with reverse mortgage proceeds at closing. If your existing loan balance exceeds what the reverse mortgage provides, you’d need to cover the difference in cash.

Do you still own your home with a reverse mortgage?

Yes. You remain on title with all ownership rights. The lender holds a lien, the same as with any mortgage. The persistent belief that “the bank takes your house” is false — though the loan does become due when you permanently leave the home.

What if I need to move into assisted living?

This is the risk most reverse mortgage borrowers underestimate. If you’re out of the home for 12 consecutive months, the loan becomes due and payable, even for medical care. If there’s a meaningful chance you’ll need long-term care within several years, factor that into the decision and discuss it with a counselor.

Reviewed by: Tom Murphy, Loan Officer | NMLS #662141 | Fact Checked ✓

This article is educational and not financial, legal, or tax advice. Reverse mortgages are complex products with significant long-term consequences for you and your heirs. HUD requires counseling from an approved agency before any HECM application — find a counselor at hud.gov/findacounselor or call (800) 569-4287.

Counseling is free or low-cost, and the counselor works for you, not a lender. Never pay an upfront fee for reverse mortgage assistance. Program rules, fees, and limits change without notice. Consult a HUD-approved counselor and a licensed professional before proceeding. RefiGuide.org is not a lender but an advertising marketplace.

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