Everything Side by Side
| Feature | Reverse Mortgage (HECM) | HELOC |
|---|---|---|
| Minimum age | 62 (borrower must be 62+) ✓ Non-borrowing spouse protection available |
No age requirement Open to all homeowners |
| Monthly payments required | No — optional only ✓ No monthly mortgage payment while you live there |
Yes — interest during draw period, principal + interest after ✗ Payments continue through retirement |
| When loan is repaid | When you sell, move out, or pass away ✓ Repayment deferred for life of occupancy |
Monthly during repayment period (typically years 11–30) ✗ Can create payment shock at year 10 |
| Credit score required | No minimum score ✓ Financial assessment (not credit-based) |
620+ typically; 720+ for best rates ✗ Fixed income may hurt DTI qualification |
| Income verification | Financial assessment only — no income minimum ✓ Social Security and pension count fully |
Full income documentation required ✗ Retirees often struggle to qualify |
| Equity required | Significant equity or low balance; HUD formula determines amount | Minimum 15–20% equity; typically up to 80–85% CLTV |
| Line of credit growth | Yes — LOC grows at ~6.75%/yr (at 6.25% expected rate) ✓ Unused credit compounds in your favor |
No growth — draw limit is fixed or can decrease ✗ Lender can reduce or freeze your limit |
| Can lender freeze the line? | No — federally protected ✓ Cannot be frozen if you meet loan terms |
Yes — lender can freeze or reduce during recessions ✗ 2008–2009: many HELOCs were frozen |
| Interest rate type | Adjustable (ARM) or fixed lump-sum Expected rate used for principal limit calculation |
Variable — tied to prime rate ✗ Rate risk in rising-rate environments |
| Upfront costs | 2% upfront MIP + origination fee + closing costs (~$28K on $950K home) ✗ Higher closing costs than HELOC |
Low — appraisal, title, small origination fee (~$500–$2,500) ✓ Lower to access |
| Ongoing costs | 0.5% annual MIP on outstanding balance, servicing fee (~$35/mo) | Annual fee ($50–$75), rate fluctuations |
| Non-recourse protection | Yes — you (or your heirs) never owe more than the home's value ✓ FHA insured |
No non-recourse protection ✗ Deficiency judgment possible in some states |
| HUD counseling required | Yes — independent HUD-approved counselor required before application | No counseling required |
| Primary residence only | Yes — must be your primary home | No — HELOCs available on vacation homes and investment properties |
| Affects Social Security / Medicare | No — HECM proceeds are loan advances, not income ✓ Does not affect SS or Medicare |
No income impact for either program |
| Medicaid / needs-based programs | Proceeds must be spent in month received to avoid asset test ✗ Consult elder law attorney |
Same caution applies to HELOC draws |
Table reflects standard HECM terms. Jumbo/proprietary reverse mortgages have different structures. Consult a licensed HECM specialist for your specific scenario.
What You Actually Pay Each Month
For retirees on fixed incomes, the monthly payment question isn't abstract — it's whether you can afford to stay in your home. Here's what the same $950,000 home with $165,000 owed looks like under each option.
Why the HELOC Freeze Risk Matters in Retirement
Many retirees open a HELOC as a "just in case" credit line — a safety net for home repairs, medical costs, or a market downturn when they don't want to sell investments. It feels sensible. But there's a structural problem with this plan.
A HECM reverse mortgage line of credit has the opposite behavior. It is federally guaranteed: as long as you meet the basic loan terms (living in the home, paying property taxes and insurance), your available line cannot be frozen, reduced, or cancelled — regardless of what happens to your home's value or the broader economy.
The HECM Line of Credit Grows Over Time
This is the most misunderstood feature of the reverse mortgage. When you establish a HECM line of credit and leave it unused, the available credit grows each month — at the current interest rate plus the 0.5% FHA MIP rate.
At a 6.25% expected rate, that's approximately 6.75% annual growth. On a $120,000 LOC, that's roughly $8,100 more available in year one — without making a single payment and without the line being touched.
This growth isn't a return on investment. It represents increasing borrowing capacity — the amount you can draw increases. But for someone planning to use the LOC for home care at age 78 or 82, having it open and growing at 65 can mean the difference between accessing $120,000 and accessing $200,000+ when you actually need it.
Who Each Option Is Actually Right For
- Are 62 or older and in your primary residence
- Want to eliminate or reduce monthly mortgage payments
- Need a growing financial reserve for home care or healthcare
- Have significant equity but limited monthly cash flow
- Want a line of credit that can't be frozen or cancelled
- Are using it as a buffer asset strategy with a financial planner
- Already have a HELOC you'd like to pay off and replace
- Plan to stay in the home long-term (3+ years minimum)
- Are under 62 and don't meet the reverse mortgage age threshold
- Have steady employment income and can comfortably make monthly payments
- Need short-term access to equity (1–5 year horizon)
- Plan to sell or move within 5 years
- Want lower upfront closing costs
- Need access to equity on a vacation home or investment property
- Have a specific project (renovation, tuition) with a defined cost
I Already Have a HELOC. Can I Get a Reverse Mortgage?
Yes — but the HELOC must be paid off at or before closing on the reverse mortgage. The HECM cannot close with a subordinate lien still open.
The good news: in many cases, your reverse mortgage proceeds can be used to pay off the HELOC at closing. If your principal limit is large enough to cover the payoff plus fees and still leave you with meaningful available funds, this can actually be a smart conversion — you replace a line you're paying interest on with a line that grows on its own and requires no payments.
This is worth running through a full analysis. If you currently have a HELOC and are 62 or older, a 20-minute call is usually enough to know whether it makes sense to convert.