1,401,176 HECM reverse mortgages insured by FHA since 1989.
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Reverse mortgage guide
A HECM line of credit and a bank HELOC both let you borrow against your home and pay interest only on what you use. The HELOC usually wins on upfront cost, but it requires monthly payments, it has a set end date, and the bank can freeze or reduce it. The HECM line has no required monthly mortgage payments, it can't be frozen while you meet the loan terms, and the unused part grows over time. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. Generally, a HELOC fits short-term needs for people who can easily make payments, and a HECM fits homeowners 62 and older who plan to stay put.
Ever since the first day our company started doing reverse mortgages, we've been asked the question: why not just get a HELOC instead of a reverse mortgage?
It's a fair question. Both are lines of credit secured by your home. Both charge interest only on what you draw. On the surface they look like cousins. But they behave very differently when life gets complicated, and that's usually when you need the money most.
So let's put them in the ring. Ten rounds, scored honestly. I'll tell you where the HELOC wins, too.
In this corner, the HECM. A Home Equity Conversion Mortgage is the FHA-insured reverse mortgage for homeowners 62 and older. With an adjustable-rate HECM, you can set up a line of credit, take monthly payments, take a lump sum, or mix them. There are no required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. Learn more on Reverse Mortgages.
And in this corner, the HELOC. A Home Equity Line of Credit is a loan from a bank or credit union that lets you draw up to a set limit. There's no age requirement. You make monthly payments, and approval is based on your income, credit, and the equity in your home. See Home Equity and HELOC.
HECM. Every borrower must be 62 or older, and the home must be your primary residence. You meet with an independent HUD-approved counselor before you apply. Since 2015, the lender also does a financial assessment, which looks at your credit and whether you've kept up with property taxes and insurance, and checks that your income can cover those bills. There's no monthly mortgage payment to qualify for, though, so many people who couldn't qualify for a HELOC can qualify for a HECM. See Reverse Mortgage Financial Assessment.
HELOC. The bank looks at your income, debts, credit score, and home value. It needs to see that you can afford the monthly payments on the full line. That's harder on a fixed retirement income than most people expect.
Round 1 goes to the HECM for most retirees, because you don't have to qualify for a payment. If you're under 62, the HELOC wins by default.
HECM. A HECM has an origination fee that HUD caps, FHA's upfront mortgage insurance, and the usual closing costs like title, escrow, and appraisal. Some pricing options trade a slightly higher rate for lower upfront costs. Most costs can be paid from the loan. See Reverse Mortgage Costs.
HELOC. HELOC closing costs vary by lender, but they're often small, and some banks waive them. Watch for an early closure fee if you pay it off and close it within a few years, and for an annual fee.
Round 2 goes to the HELOC. No contest. If you only need the money for a short time, this round can decide the whole fight.
HECM. The amount is based on the age of the youngest borrower or eligible non-borrowing spouse, your home's value up to the HECM lending limit, and current rates. Older borrowers can access a larger share. HUD limits how much you can take in the first year. See Lending Limits, or get your estimate.
HELOC. Banks usually lend up to a set percentage of your home's value, minus any mortgage you already have. But you also have to qualify for the payment, so your income often limits the line more than your equity does.
Round 3 is a draw. It depends on your age, equity, and income. I run both when someone asks.
HECM. A HECM has no set due date. It comes due when the last borrower or eligible non-borrowing spouse no longer lives in the home, or if the loan terms aren't met. You can keep the line open for decades.
HELOC. Most HELOCs have a draw period, often around 10 years, followed by a repayment period when you can't draw anymore and the payment goes up to cover principal. At the end, you repay or refinance.
Round 4 goes to the HECM, unanimously.
This is the round that changed a lot of minds in 2008.
HELOC. Federal rules let a bank freeze or reduce a HELOC if your home's value drops significantly or your financial situation changes in a big way. During the financial crisis, that's exactly what happened. Countrywide alone suspended more than a hundred thousand lines, and other big banks followed. People who were counting on that money as their emergency fund found the door locked.
HECM. As long as you meet the loan terms, the lender can't freeze, reduce, or cancel a HECM line of credit. It's there when the market is down and home values are falling, which is exactly when a safety net matters.
Round 5 goes to the HECM by knockout.
HECM. The unused part of a HECM line of credit grows over time, at the same rate as your loan balance: the note rate plus annual mortgage insurance. The longer you leave it alone, the more you can draw later. That's the heart of the standby line of credit strategy that financial planners have studied for over a decade.
HELOC. A HELOC limit doesn't grow. In fact, it can shrink (see Round 5).
Round 6 goes to the HECM.
HECM. You can choose a fixed rate or an adjustable rate, but only the adjustable rate offers a line of credit. Adjustable HECM rates are an index plus the lender's margin, with caps: an annual adjustable can't move more than 2 points a year or 5 points over the life of the loan, and the monthly adjustable loans we offer can't move more than 5 points over the life of the loan. See Reverse Mortgage Rates.
HELOC. Most HELOCs are tied to the prime rate plus a margin. Federal rules require a HELOC to state a maximum rate, but that cap can be high, and many HELOCs start with a teaser rate that rises after a few months. Read the fine print.
Round 7 goes to the HECM for clearer, federally set caps. Compare today's actual numbers before you decide.
HECM. There are no required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. You can make voluntary payments any time, and on an adjustable line, money you pay back becomes available to draw again.
HELOC. You make a monthly payment, usually interest-only during the draw period. When the draw period ends, the payment generally jumps to cover principal too, and some plans require a lump-sum payoff. The more you draw, the higher the payment.
Round 8 goes to the HECM. This is the biggest reason retirees choose one. Monthly cash flow matters more at 72 than at 42.
HECM. Interest on a reverse mortgage generally isn't deductible, and even when IRS rules allow it, it can't be deducted until it's actually paid, which for most people is when the loan is paid off. Draws are loan proceeds, not income.
HELOC. HELOC interest may be deductible, but under current IRS rules generally only if the money is used to buy, build, or substantially improve the home.
Round 9 is a draw. It depends on your situation. This is a conversation for your CPA.
HECM. A HECM is non-recourse. If the home sells for less than the loan balance, you and your heirs don't pay the difference. FHA insurance covers it. An eligible spouse who isn't on the loan can generally stay in the home after you die. See Reverse Mortgages and Heirs.
HELOC. A HELOC is a regular debt. If the home sells for less than what's owed, the rules depend on your state and your loan, and your estate may owe the rest. And when you die, it's due like any other loan.
Round 10 goes to the HECM.
Tallying it up: the HECM takes most rounds, the HELOC takes the cost round, and a few are draws that depend on you. But you're not scoring a fight on TV. You're picking the right tool for your life. Each person's situation is different and can't be settled with a blanket statement.
Here's the whole fight on one card:
| Feature | HECM line of credit | Bank HELOC |
|---|---|---|
| Who can get one | Homeowners 62 and older | No age requirement |
| Qualifying | Financial assessment of income, credit, and property charge history. HUD sets no minimum credit score | Income, credit score, and debt-to-income rules |
| Upfront costs | Higher: origination, FHA mortgage insurance, closing costs | Usually lower |
| Monthly payments | No required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. | Required monthly payments |
| How long you can draw | For as long as the loan is in good standing | A set draw period, then a repayment period |
| Can the line be frozen or cut? | Not while you meet the loan terms | Yes, in certain situations under Regulation Z |
| Unused line | Grows over time | Doesn't grow |
| When it comes due | When the last borrower or eligible non-borrowing spouse leaves the home, or the loan terms aren't met | On the schedule in the loan, or when you sell |
| If the home is worth less than the balance | Non-recourse: you and your heirs don't pay the difference | You or your estate can owe the full balance |
| Usually best for | Staying put for years and wanting a safety net without a payment | Short-term needs when you can comfortably make payments |
You can't keep a HELOC open on the same home as a HECM, because a HECM has to be in first position and other liens are generally paid off at closing. But a HECM can pay off an existing HELOC. If you've drawn on the HELOC recently, read Reverse Mortgage Lien Seasoning Requirements first.
When you're trying to decide, start here:
Ultimately, the decision is yours. I'm glad to run both side by side with real numbers, and I'll tell you honestly if the HELOC is the better fit. Get your estimate or call us at 530-888-6000.
For many homeowners 62 and older who plan to stay put, yes, because it has no required monthly mortgage payments, it can't be frozen while you meet the loan terms, and the unused part grows. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. For short-term needs, a HELOC often costs less.
Yes. Federal rules let lenders freeze or reduce a HELOC in certain situations, such as a big drop in your home's value. Many were frozen in 2008.
Not while you meet the loan terms, such as living in the home and paying property taxes and homeowners insurance.
Yes. Existing liens are paid off at closing. If a home equity loan or line was opened in the last 12 months and you've taken more than a small amount of cash from it, seasoning rules may apply.
Yes, on an adjustable-rate HECM, the unused part grows at the note rate plus annual mortgage insurance. A fixed-rate HECM has no line of credit.
Upfront, the HELOC almost always is. Over a long time, it depends on how much you draw, rates, and whether you'd have paid the HELOC payments from savings. Look at the Total Annual Loan Cost for the reverse mortgage over the time you expect to keep it.
See what Suze Orman and Dave Ramsey have said, and how it lines up with today's rules. For both sides in one place, see Reverse Mortgage Pros and Cons.
ZYNG Mortgage, Inc., NMLS #76801. A reverse mortgage has no required monthly mortgage payments and uses your home's equity. Fees, mortgage insurance and other costs can be added to the loan balance, and the balance grows over time as interest is added, so your equity typically decreases. When the loan becomes due, the home may need to be sold, or the loan repaid from other funds. Interest is not tax-deductible until it is paid, in part or in full. You keep title to your home and must keep paying property taxes, homeowners insurance and upkeep, and meet the other loan terms; not doing so can make the loan due and could lead to foreclosure.
This material is not from HUD or FHA and was not approved by HUD or a government agency.
HECM count at the top of this page: HUD data through September 2026 (source, opens in a new tab).
