Last updated: November 2025
Quick Answer
Reverse mortgages (HECMs) and HELOCs both let you tap into home equity, but they serve different purposes. A reverse mortgage is designed for seniors, offers no required monthly payments, and repays only when you move out or pass away. A HELOC is a flexible, revolving loan with active repayment. Your best option depends on your age, income, and goals.
What is a HELOC?
A home equity line of credit (HELOC) allows you to borrow against the value of your home while keeping full ownership. You receive a credit limit based on your loan-to-value (LTV) ratio and can draw funds as needed during a typical 10-year draw period. After that, you repay for another 10–20 years.
HELOC features:
- Variable interest rate
- Interest-only payments during the draw period
- Credit-based approval
- You must repay monthly during the repayment phase
- You retain full ownership and control of your home
HELOCs are ideal for homeowners who want flexible access to equity without refinancing their primary mortgage.
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What is a reverse mortgage (HECM)?
A Home Equity Conversion Mortgage (HECM) is the most common type of reverse mortgage. It’s a federally insured loan available to homeowners aged 62 or older.
With a HECM, you convert a portion of your home equity into tax-free cash without making monthly mortgage payments.
HECM features:
- No required monthly repayments
- Borrowers must live in the home as a primary residence
- The loan is repaid when you sell the home, move out permanently, or pass away
- FHA insurance guarantees you or your heirs will never owe more than the home’s value
The amount you can borrow depends on your age, home value, interest rates, and the FHA’s Principal Limit Factor.
HELOC vs. HECM: Key differences
| Feature | HELOC | Reverse Mortgage (HECM) |
| Age requirement | None | 62+ |
| Monthly payments | Required | Not required |
| Credit and income | Required for approval | Limited financial assessment |
| Loan repayment | Ongoing during term | Due when you move or pass away |
| Home ownership | You retain title | You retain title |
| Tax implications | Not tax-deductible unless used for home improvement | Loan proceeds are tax-free |
| Use of funds | Any purpose | Any purpose |
| Line of credit growth | No | Yes (unused line grows over time) |
Learn: How does a HELOC work?
When a HELOC may be the better choice
A HELOC might be better if:
- You are under 62
- You have a strong income and credit
- You plan to repay the loan gradually
- You want revolving access to funds
- You prefer to avoid reverse mortgage fees and insurance premiums
Benefits of a HELOC
- Easier access for younger homeowners
- Lower upfront costs than HECMs
- Interest-only payment options for flexible cash flow
Considerations:
- Monthly repayment begins after the draw period
- Missed payments could lead to foreclosure
- Variable interest rates can increase over time
Learn: Use our HELOC calculator.
When a reverse mortgage may be better
A HECM might be more appropriate if:
- You are age 62 or older
- You want to eliminate monthly mortgage payments
- Your retirement income is limited
- You plan to stay in your home long-term
- You want peace of mind that the loan won’t exceed your home’s value
Benefits of a reverse mortgage:
- No required monthly payments
- Proceeds can be taken as a lump sum, monthly payments, or a line of credit
- A line of credit can grow over time, increasing available funds
- FHA insurance adds protections for heirs
Considerations:
- High upfront costs, including FHA mortgage insurance
- You must maintain the home and pay property taxes, and insurance
- Loan balance increases over time as interest accrues
Learn: How to apply for a HELOC.
Risk factors and repayment considerations
Each loan type comes with its own risks. For a HELOC, failure to make payments could result in foreclosure.
For a HECM, the loan must be repaid when the borrower no longer lives in the home, which could mean heirs sell the property or refinance.
HELOC risks
- Payment shock from rising interest rates
- Shorter repayment periods after the draw phase
- Risk of default and foreclosure
HECM risks
- Reduced home equity over time
- High closing and insurance costs
- Home must remain your primary residence
Tax and estate implications
HELOCs
- Interest is only tax-deductible if used to buy, build, or substantially improve the home
- Not considered income, but interest adds to your monthly expenses
HECMs
- Proceeds are not taxable
- Reduces estate value left to heirs, but heirs are not personally liable for the debt
- If the home’s value exceeds the loan, heirs keep the difference
Consult a tax advisor or estate planner to evaluate how either option aligns with your long-term financial strategy.
Choosing between a HELOC and a HECM
Deciding between a reverse mortgage and a HELOC depends on:
- Your age
- Your income stability
- Your long-term housing plans
- How you want to repay the loan
- Whether you prioritize access to cash or preserving home equity
If you’re younger, working, and looking for a flexible credit line, a HELOC may be best. If you’re retired and seeking to supplement your fixed income with no required payments, a HECM could be a better solution.
Tailor your home equity strategy to your life stage
Reverse mortgages and HELOCs both offer powerful ways to access home equity, but they serve different needs. A HELOC is a better fit for active earners or younger homeowners seeking flexibility.
A reverse mortgage helps retirees secure income without taking on monthly debt.
Knowing your options and your obligations helps you choose the strategy that protects your home and your future.
Check your HELOC rate in minutes with HomeEQ.
FAQ: Reverse mortgages (HECM) vs. HELOCs
Q: What’s the main difference between a reverse mortgage and a HELOC?
A: A reverse mortgage requires no monthly payments and is available only to seniors. A HELOC requires monthly repayment but is available to most homeowners with sufficient equity.
Q: Do I lose ownership of my home with a HECM?
A: No. You remain the homeowner. HECM loans are repaid when the home is sold, you move out, or you pass away.
Q: Can I get a HELOC if I’m retired?
A: Yes, as long as you meet the credit, income, and equity requirements. Retirement income can count toward eligibility.
Q: Does a reverse mortgage affect Social Security or Medicare?
A: No. HECM proceeds are not counted as income—they do not impact Social Security or Medicare benefits.
Q: Which option is safer for preserving equity for heirs?
A: HELOCs typically preserve more equity if repaid responsibly. Reverse mortgages can erode equity over time due to accruing interest, but they come with non-recourse protections for heirs.
