What is the biggest difference between a HELOC and a reverse mortgage?

A HELOC requires monthly payments and qualifies you on income; a reverse mortgage has no required monthly payment and qualifies you on age and equity. A HELOC can be called or frozen by the bank; a reverse mortgage credit line cannot be frozen and actually grows over time. A HELOC ends after 30 years; a reverse mortgage lasts as long as you live in the home.

Do I lose my house with a reverse mortgage?

No. You keep the title. The loan becomes due when you sell, move out permanently, or pass away. Your heirs can keep the home by paying off the loan balance (typically by refinancing or from their own funds) or sell the home and keep any equity above the loan balance. If the home is worth less than the loan, FHA insurance covers the shortfall.

Which is cheaper — HELOC or reverse mortgage?

HELOCs have lower closing costs ($0-$500 typical) but require monthly payments and carry variable interest rates around 7.43% in July 2026. Reverse mortgages have higher upfront costs (mortgage insurance premium of 2% of home value plus origination) but no monthly payment obligation. Over 5 years, a HELOC usually costs less; over 15+ years, a reverse mortgage often wins because you're not paying interest monthly and your credit line grows.

Can I qualify for a HELOC on Social Security income?

Yes, Social Security counts as income for HELOC qualification. Lenders can gross it up (typically by 15-25%) since it's non-taxable. However, many retirees have low reportable income relative to their equity — this is the classic scenario where a reverse mortgage qualifies when a HELOC does not, because reverse mortgages qualify on age and residual income guidelines rather than debt-to-income ratios.

Does a reverse mortgage affect Medicare or Social Security?

No. Reverse mortgage proceeds are loan proceeds, not income. They do not affect Medicare, Social Security, or Medicare Part B premiums. They can affect need-based programs like Medicaid and SSI if you keep the money in a bank account for more than one month — spend it quickly or convert it to non-countable assets to avoid this.

HELOC vs Reverse Mortgage: Which Is Right for Retirees in 2026?

Q: At what age can I get a reverse mortgage?

For a federally-insured HECM (Home Equity Conversion Mortgage), you or an eligible non-borrowing spouse must be 62. Some proprietary jumbo reverse mortgage products start at age 55 in select states. A HELOC has no age requirement — anyone with sufficient income and equity can qualify.

The short answer

Use a HELOC if any of these are true:

You're under 62 (reverse mortgages require age 62 for a HECM, 55 for some proprietary products in select states)
You have strong monthly income and can comfortably afford a payment
You'll repay the balance within 5–10 years (medical bill, home repair, bridge loan)
You want the lowest possible closing costs
You want to leave every dollar of home equity to heirs

Use a reverse mortgage if any of these are true:

You're 62+ (or 55+ in select states for a jumbo/proprietary reverse) and plan to stay in the home 5+ years
You need to eliminate an existing mortgage payment to make retirement work
Your income is too low to qualify for a HELOC, but you have substantial equity
You want a growing credit line that cannot be frozen or called by the bank
You want to hedge sequence-of-returns risk on a retirement portfolio

Structural differences that matter

Required monthly payment

HELOC: Yes. Interest-only during the 10-year draw period, then fully amortizing during the 20-year repayment period. Miss payments and the lender can foreclose.

Reverse mortgage: None required. You still pay property taxes, homeowners insurance, and HOA — but no mortgage payment. Interest accrues onto the balance instead of being paid monthly.

This is the single biggest divergence. If you're on a fixed income and a $600/month HELOC payment would strain your budget, a reverse mortgage removes that obligation entirely.

Qualification

HELOC: Underwritten on income, credit score (typically 680+), debt-to-income ratio (usually under 43%), and equity. You must document income sufficient to service the payment.

Reverse mortgage: Underwritten on age (older = more available), current interest rates, home value, and a "financial assessment" that checks whether you can afford property taxes and insurance going forward. Income requirements are much softer — a "residual income" test rather than a DTI ratio. Credit score matters far less; even mid-500s can qualify.

How much you can access

HELOC: Usually 85% CLTV (combined loan-to-value) minus your first mortgage balance. On a $600K home with a $200K mortgage: 85% × $600K = $510K, minus $200K first = $310K HELOC line potential (subject to income qualification).

Reverse mortgage: Based on the "principal limit factor" — a percentage of your home value determined by the youngest borrower's age and current expected rates. In July 2026, a 65-year-old can access roughly 40–45% of home value; a 75-year-old, roughly 50–55%; an 85-year-old, roughly 60–65%. That percentage must first pay off any existing mortgage; the rest is available to you as line, lump sum, or monthly installments.

Interest rates and how interest works

HELOC: Variable rate tied to prime plus a margin. Currently around 7.43% average (Bankrate, July 2026). Interest is charged monthly on the drawn balance and paid monthly by you.

Reverse mortgage: Adjustable HECM rates in July 2026 run about 7.0–7.5% (index + margin, capped at lifetime max). Fixed-rate HECM is available but only for lump-sum draws. Interest accrues onto the loan balance monthly. You never pay it until the loan matures (sale, move-out, or death of the last borrower).

Costs to set up

HELOC: $0 to $500 typical. Some lenders charge nothing.

Reverse mortgage (HECM): Higher. Expect:

Origination fee: capped at $6,000 (2% of first $200K value + 1% above, capped)
Initial mortgage insurance premium: 2% of the maximum claim amount (home value or FHA lending limit, whichever is lower — $1,209,750 in 2026)
Third-party costs: title, appraisal, counseling ($125–$200), recording — typically $2,000–$4,000
Ongoing mortgage insurance premium: 0.5% annually on the outstanding balance

On a $500K home, HECM setup runs roughly $12,000–$16,000 all-in. Most of it can be financed into the loan so you don't pay out of pocket — but it comes out of your available principal limit.

What happens when the loan ends

HELOC: You keep paying until the balance is zero. Standard mortgage rules apply. When you sell or die, the balance is paid off and any remaining equity goes to you or your heirs.

Reverse mortgage: The loan matures when the last borrower permanently leaves the home (sells, moves to assisted living for 12+ consecutive months, or passes away). Heirs have 6 months (with up to two 90-day extensions) to either:

Keep the home — pay off the reverse mortgage balance (typically by refinancing into a traditional mortgage or paying cash)
Sell the home — pay off the balance from proceeds, keep the rest
Walk away — sign a deed-in-lieu; FHA insurance covers any shortfall between loan balance and home value

Key point: a HECM is non-recourse. Heirs are never on the hook for more than the home's value, even if the loan balance exceeds it.

Effect on heirs and estate

HELOC: Preserves the maximum equity for heirs — you're paying down interest monthly so the balance shrinks (or at least stays flat during the draw period).

Reverse mortgage: Balance grows over time because interest accrues onto principal. If home appreciation is faster than the loan's growth rate, equity still exists at death. If not, heirs get little or nothing above the loan balance. This is the biggest emotional objection most families raise — and often it's the right objection. But for retirees whose alternative is running out of money in year 15 and being forced to sell anyway, protecting inheritance can't be the priority.

Can the lender freeze or reduce your credit line?

HELOC: Yes. If your home value drops or your credit deteriorates, the bank can reduce or freeze your line. This happened widely during the 2008–2010 downturn and again in the 2020 pandemic scare. When you need it most is exactly when it's most likely to be frozen.

Reverse mortgage line of credit: No. It's contractually guaranteed and cannot be frozen for market reasons. What's more, the unused portion of the line grows every month at the note rate plus 0.5% (the ongoing MIP rate). Over 10 years, an unused $200K reverse mortgage line can grow to $350K+ of available borrowing power — while a HELOC line only shrinks.

Real-world scenarios

Scenario 1: 58-year-old, $80K income, $200K equity, wants to remodel kitchen for $40K

Recommendation: HELOC. Too young for a HECM (would need to be 62), income easily supports payments, short-term project. A HELOC at 7.43% on $40K is roughly $250/month interest-only during the draw period. Clean fit.

Scenario 2: 68-year-old, $2,800/month Social Security, $650K home, $180K mortgage remaining at 6.5%

Recommendation: reverse mortgage (HECM). The existing $1,300/month P&I payment eats 46% of her income. A HECM at her age accesses about 50% of home value = ~$325K principal limit. That pays off the $180K first mortgage and leaves ~$145K as credit line. Her required monthly mortgage payment goes to $0. She stays in the home, cash flow relaxes, and she has a growing line if a medical event happens later.

Scenario 3: 72-year-old couple, $9,000/month combined pension + Social Security, $1.2M home, no mortgage

Recommendation: reverse mortgage credit line as a portfolio hedge, or HELOC if they'll actually spend it soon. This is the case Wade Pfau's research supports — set up a HECM line of credit early (age 62 is optimal) as a "buffer asset" they can draw from in years the market drops, preserving their portfolio during down years. The line grows at ~7% annually. If they don't need it, it just accumulates unused capacity. A HELOC does the opposite — it can shrink or be frozen when they need it most.

Scenario 4: 65-year-old, $180K annual income, $850K home, $300K mortgage at 3.0%

Recommendation: HELOC. High income, low existing rate, wants flexibility. She easily qualifies for a HELOC, doesn't want to give up her 3% first mortgage, and the reverse mortgage's upfront costs don't make sense at this income level. She may revisit a reverse mortgage at 75+ when income drops.

Scenario 5: 82-year-old widow, $1,900/month Social Security, $500K home, no mortgage, credit score 620

Recommendation: reverse mortgage. She won't qualify for a HELOC (income and credit both marginal). Her HECM principal limit at her age is roughly 60% of home value = $300K. She can take it as a monthly tenure payment for life ($1,600–$1,800/month depending on rates) — adding to her Social Security without touching her home. Or as a credit line she draws from as needed. Or a combination. This is the textbook reverse mortgage case.

The single biggest mistake people make

Ruling out reverse mortgages because "I heard they're a scam" or "the bank takes your house." Neither is true in 2026. HECMs are federally insured, tightly regulated, require independent counseling before you can apply, and are non-recourse (heirs never owe more than the home is worth). The consumer protections around HECMs are among the strongest of any mortgage product in the U.S.

The mirror mistake: assuming a reverse mortgage is always right for anyone over 62. It's not. If you have plenty of income and want to preserve heirs' inheritance, a HELOC (or no borrowing at all) is often better. Reverse mortgages shine when income is constrained, monthly cash flow matters, and staying in the home 5+ years is the goal.

The hybrid strategy most people don't know about

For borrowers between 55 and 62 who want the reverse mortgage's payment-optional structure but aren't yet HECM-eligible, some proprietary jumbo reverse mortgage products start at age 55 in California, Florida, and a handful of other states. These have higher rates than HECMs and no FHA insurance, but they can bridge the gap for younger retirees with high-value homes.

For borrowers over 62 who want the flexibility of a HELOC AND the safety net of a reverse mortgage, you can do both: keep the HELOC for short-term needs, and set up a small HECM line of credit as long-term insurance. Not many originators will structure this because it splits the commission — but if it fits your situation, it's often the strongest setup.

How to decide in 5 minutes

Answer these five questions:

Are you under 55? → HELOC (reverse mortgage isn't available).
Do you have strong monthly income and want to preserve inheritance? → HELOC.
Are you 62+ with a mortgage payment that's straining your retirement budget? → Reverse mortgage.
Are you 62+ with a portfolio you want to protect from sequence-of-returns risk? → Reverse mortgage line of credit (set up early, use as needed).
Are you 62+ with low income but substantial equity, needing income supplementation for the rest of your life? → Reverse mortgage tenure payment.

How we'd help you decide

I originate both products directly — HELOCs across 22 states and HECM reverse mortgages nationwide. Because I don't earn more on one than the other, I have no incentive to steer you toward the wrong product. When someone contacts me about a HELOC and I think a reverse mortgage would actually serve them better, I say so. And vice versa.

If you're weighing these two options, tell me your age, home value, existing mortgage balance, monthly income, and what you'll use the money for. I'll model both and show you the 5-, 10-, and 20-year cost and cash-flow difference for your specific numbers.

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Audi Garner — Branch Manager & Mortgage Broker

NMLS #190235 · Direct HELOC lender across 22 states. Direct reverse mortgage lender nationwide. Also broker for Conventional, FHA, VA, Jumbo, and Non-QM.

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