Reverse Mortgage vs. Home Equity Loan or HELOC

Repayment terms begin immediately upon disbursement of funds. Homeowners make monthly payments for 5 to 30 years. If you fail to make on-time payments, the lender may initiate foreclosure proceedings. 

Unlike a home equity loan, you don’t have to start repaying the loan as soon as you withdraw funds. Instead, you’ll have a draw period, which is typically 10 years, and you’ll pay interest only on the amount you withdraw during that time. 

At the end of the 10-year term, you can no longer make withdrawals from the line of credit and will enter the repayment period, which is typically 20 years. You’ll have to make minimum payments each month — and, like a home equity loan, your lender can foreclose on your home if you fail to pay. 

Homeowners are not required to make payments as long as these conditions are met, but interest will still accrue, meaning they’ll owe more when they leave the house than when they took out the loan. If the loan is not paid off before the mortgage borrower’s death, the heirs will have 30 days to inform the lender whether they plan to sell the property, transfer it to another owner, or keep it and pay off the debt. Usually, the heirs have 6 to 12 months to carry out their plan. 

The most common type of reverse mortgage, the Home Equity Conversion Mortgage (HECM), is backed by the U.S. Department of Housing and Urban Development. Homeowners must be 62 or older, have 50% or more home equity, and complete a mandatory counseling session with a HUD-approved counselor. As of 2026, the maximum HECM amount allowed was $1,249,125.

Most reverse mortgage lenders also offer a proprietary jumbo reverse mortgage product for those aged 55 or older. 

It’s also important for homeowners considering this option to speak with a HUD-approved counselor or a certified financial planner to understand the risks for themselves and their heirs. 

Here’s who may want to consider tapping into their home equity with a reverse mortgage: 

• Homeowners 62 years or older (55 years or older in some cases)
• Homeowners who need to supplement their retirement income, and have no other way to do so other than their home equity
• Homeowners with 50% or more in equity 
• Homeowners who are certain they’ll be able to make on-time payments on homeowners insurance and property taxes. 
• Homeowners who have the ability to keep up with their home maintenance

If you’ve decided a reverse mortgage is the right option for you, two of our top lender picks are Longbridge Financial and Finance of America. 

Longbridge Financial offers lower rates than its competitors and doesn’t charge a monthly fee, unlike other reverse mortgage lenders. Active-duty service members and veterans can receive $500 toward closing costs with Longbridge. 

The home equity loan’s lump sum structure makes it ideal for funding a project, paying off high-interest debt, or using the money to make a one-time investment into an asset that will grow in value, such as a business, home renovation project or education pursuit.

Here’s who may want to consider tapping into their home equity with a home equity loan: 

• Homeowners who need a one-time lump sum 
• Homeowners who can make on-time monthly repayments 
• Homeowners with strong credit, a debt-to-income ratio of 43% or less and at least 10% to 20% in equity. 
• Homeowners under age 55 who want to tap into their home equity

If you’ve decided a home equity loan is right for you, Rocket Mortgage and Connexus Credit Union are two of our top picks. 

Rocket Mortgage has a stellar record of customer service, consistently ranking among the top lenders on J.D. Power’s customer satisfaction surveys. It also has great customer service hours and a mobile app. 

A HELOC is another excellent option for those who want to tap into their home equity without the age and equity restrictions or risks of a reverse mortgage. 

It’s better for people who don’t know exactly how much they may need, and may need to make multiple withdrawals over a 10-year period. It’s also a good option for those who know they will earn more money during the 20-year repayment term than they did when they opened the debt.

• Homeowners who need a revolving line of credit
• Homeowners who can make on-time monthly interest payments during the draw period and on-time monthly payments during the repayment period. 
• Homeowners with strong credit, a debt-to-income ratio of 43% or less and at least 10% to 20% in equity. 
• Homeowners under age 55 who want to tap into their home equity

If you’ve decided a HELOC is your best option, TD Bank and Bank of America are two of our top picks for HELOC lenders. 

Additionally, we incorporate findings from independent sources, including lender scores from the J.D. Power mortgage origination and servicing surveys and ratings from the Better Business Bureau.

For home equity loans, we review rates, repayment terms, the amount of equity required and the minimum and maximum loan amounts available.

We also consider requirements for credit scores, debt-to-income ratios and combined loan-to-value ratios.