Reverse mortgage vs home equity loan is a comparison of two products that reach the same equity from opposite directions: one is repaid monthly, the other accrues until a triggering event. Neither is better in the abstract. This guide sets out the differences neutrally. It is educational only and is not a recommendation of either product.
How a reverse mortgage works
A reverse mortgage lets an eligible older homeowner convert part of their equity into funds without a required monthly principal-and-interest payment. Interest and fees are added to the balance, which grows over time, while remaining equity shrinks.
The most common type is the Home Equity Conversion Mortgage (HECM), federally insured and administered under HUD rules. Proceeds may come as a lump sum, monthly payments, a line of credit, or a combination.
Crucially, the borrower remains responsible for property taxes, homeowners insurance, any association dues, and keeping the home in good repair. Failing to meet those obligations, or ceasing to live in the home as a principal residence, can make the loan due and payable.
How home equity loans and HELOCs compare
A home equity loan or HELOC works the conventional way: you borrow and repay monthly from the start, so balances fall rather than rise. There is no age requirement, but there is an income and credit test.
Both are secured by your home, so falling behind on either can put the property at risk. See home equity loan vs HELOC and the home equity borrowing hub.
Eligibility and counseling requirements
- Age. HECMs require the youngest borrower to be at least 62. Some proprietary reverse mortgages advertise lower minimum ages, while conventional equity products have no age minimum.
- Counseling. Independent counseling with a HUD-approved counselor is required before taking out a HECM. Treat it as a real chance to ask questions.
- Financial assessment. Companies review your ability to keep up taxes, insurance, and upkeep; a set-aside from proceeds may be required.
- Amount available. This depends on age, rates, and home value, and is limited well below full value — the same loan-to-value thinking described in how CLTV limits equity borrowing.
Repayment triggers and effects on heirs
A reverse mortgage generally becomes due when the last borrower dies, sells, or no longer lives in the home as a principal residence, or when tax, insurance, and maintenance obligations are not met.
Heirs typically choose between repaying the balance — often by selling the home or refinancing — or letting the sale settle it. HECMs are non-recourse, meaning repayment from the property is generally limited to its value at that point under federal rules. Because less equity usually remains, an inheritance may be materially reduced.
Costs and questions to ask
- Origination, servicing, closing costs, and mortgage insurance premiums on a HECM.
- Whether the rate is fixed or variable, and how the balance compounds.
- What happens to a non-borrowing spouse.
- On a conventional product: rate, term, fees, and the payment you must sustain.
Compare advertised offers
Browse finance companies and compare advertised offers, and consider independent counseling or a qualified adviser before deciding.
Frequently asked questions
What is the age requirement for a reverse mortgage?
For a HECM, the youngest borrower must be at least 62 and the home must be their principal residence. Some proprietary reverse mortgages advertise lower minimum ages. Home equity loans and HELOCs have no age minimum but apply credit and income criteria.
Do you make monthly payments on a reverse mortgage?
Not for principal and interest, which is the main structural difference. You remain responsible for property taxes, homeowners insurance, any association dues, and maintenance. Failing to meet those obligations can cause the loan to become due and payable.
What happens to my heirs with a reverse mortgage?
The balance generally becomes due when the last borrower dies or permanently leaves the home. Heirs usually repay it, often by selling or refinancing, or let the sale settle it. HECMs are non-recourse, but remaining equity is typically reduced.
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