A reverse mortgage and a HELOC both turn home equity into cash, but they work in opposite ways. A HELOC means a monthly payment and a lender who checks your credit and income. A reverse mortgage, for homeowners 62 and older, means no monthly mortgage payment and a balance that keeps growing. Which one costs less? Usually the HELOC, if you can carry the payment, and Figure is one to price.
If you can’t carry a payment, you’re under 62, or you don’t want a balance that grows every month, there’s a third option most people miss. It’s a home equity investment from Point. Below is how all three compare, what the government says about reverse mortgages, and who qualifies.
Reverse mortgage vs HELOC: how each one works
A HELOC is a credit line secured by your home. You borrow what you need and make monthly payments. The rate on what you draw can be variable or fixed, depending on the lender.
Miss the payments and your home is the collateral. Our best HELOC lenders list covers the field.
A reverse mortgage is a loan for homeowners 62 and older. The Consumer Financial Protection Bureau (CFPB) says the amount you owe goes up over time instead of down. The most common kind is the Home Equity Conversion Mortgage, or HECM, and it’s the one the CFPB’s pages describe. How much you can borrow depends on your age, the interest rate and your home’s value, and you can take the money as a line of credit, a monthly payout or a lump sum.
Who qualifies for a reverse mortgage or a HELOC
With a HELOC, the lender looks at your credit, your income and how much equity you have. There’s no age minimum. Figure’s HELOC takes credit scores from 600 in most states (640 in a few), and checking your rate is a soft pull. That’s a fairly low bar. You still need income that supports the payment.
A reverse mortgage flips that. There’s no monthly mortgage payment to qualify for, but there’s more to check. The CFPB’s eligibility page says a HECM requires:
What a HECM requires, per the CFPB
Age 62 or older. The home is your principal residence, meaning you live there most of the year. You own it outright or have a low enough mortgage balance to pay off at closing, with your own money or the loan proceeds. You owe no federal debt such as federal income taxes or federal student loans, though loan money can be used to pay those off. You can cover property taxes, insurance and upkeep, or set part of the loan aside for them. The home is in good shape. And you complete counseling with a HUD-approved agency first.
That payoff rule matters.
If you have a big first mortgage, a reverse mortgage may use up a lot of what you can borrow just clearing it.
HELOC vs reverse mortgage: which costs less?
The CFPB says a reverse mortgage is typically more expensive than other home loans. Upfront, it lists origination fees of $6,000 or less, third-party closing costs like the appraisal and title search, and an initial mortgage insurance premium paid to the Federal Housing Administration. Then the ongoing costs are interest, servicing fees and an annual mortgage insurance premium equal to 0.5% of the balance. All of that gets added to your loan balance each month, so you pay interest on the interest. The CFPB’s own advice for keeping the cost down is to borrow only what you need.
A HELOC isn’t free. Figure’s origination fee is up to 4.99%, and it funds the full amount at closing with a fixed rate on that draw. But the CFPB notes a home equity loan or line of credit might be a cheaper way to borrow. The catch is monthly payments, and qualifying depends on your income and credit.
Bottom line: if you can comfortably make the payment, a HELOC usually costs less. If you can’t, cheaper stops being the question. Which one can you actually live with?
you can carry a monthly payment and want to see a HELOC rate without a hard credit pull.
you want cash with no monthly payment and you’re under 62, or you’d rather not have a growing loan balance.
Point’s button checks your state first. Read the state list below before you click. Point also charges third-party closing costs on top of its fee.
What happens to your home and your heirs
With a HELOC, you pay the balance down and the lender has a claim on the house until it’s paid. Your age doesn’t matter.
A reverse mortgage has more moving parts.
The CFPB says a HECM must be paid off when the last borrower dies, sells the home, or stops living there as a principal residence. It can come due sooner if you stop paying property taxes or homeowners insurance, or you don’t keep the home in good repair. And if you’re away more than 12 consecutive months in a hospital, nursing home or similar facility with no co-borrower in the home, anyone living with you may have to move out unless they can pay back the loan or qualify as an eligible non-borrowing spouse.
For heirs, the CFPB’s page on heirs says they get 30 days after the due and payable notice to buy, sell or turn the home over to the lender, though that can sometimes stretch to six months. To keep the house they have to pay the full balance, maybe with a loan of their own. To sell it, they repay the balance, or at least 95 percent of the appraised value if the balance is higher than the home is worth. Mortgage insurance covers the rest. So your family can’t end up owing more than the house is worth. They can end up with a lot less house than they expected.
Reverse mortgage vs home equity loan
A home equity loan is the lump-sum cousin of a HELOC. You get the money once and repay it in fixed monthly payments. The lender checks your credit and income, same as a HELOC.
Against a reverse mortgage, the trade is simple. A home equity loan is cheaper and your balance shrinks, but you need the income to make the payment. A reverse mortgage takes the payment away and gets paid back from the house later. The CFPB also points out that a reverse mortgage lump sum costs more than a line of credit or monthly payout, because you pay interest and fees on the entire amount from day one.
The third option most people miss: a home equity investment
A home equity investment, or HEI, isn’t a loan. A company gives you cash now and takes a share of your home’s future value when you settle. Point funds $30,000 to $600,000 over a 30-year term, takes credit scores from 500, has no income requirements, and charges no monthly payments and no interest.
Point’s own reverse mortgage comparison page lays out the differences. Point says its product is available under 62, doesn’t need to be in first lien position (so you don’t have to pay off your first mortgage), has no occupancy requirements (so you aren’t forced to settle if you move out or go into long-term care), and can be assumed by heirs.
So what’s the catch? Point’s fee is up to 4.9% with a $2,000 minimum, plus third-party closing costs. The settlement is based on your home’s future value, so you give up a portion of future appreciation. If your home rises a lot, the total can end up higher than a HELOC would have cost. Ask for the settlement amount if your home stays flat, rises 20% and rises 50%, and put those next to a HELOC quote. Our Point review goes deeper, and getting equity out without a loan covers the other routes.
Point is not for manufactured homes, co-ops or homes owned by an LLC. It serves 30 states plus D.C., and only select areas inside them.
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Reverse mortgage vs HELOC vs Point, side by side
| Compare | Reverse mortgage (HECM) | HELOC | Point HEI |
|---|---|---|---|
| Age | 62 or older | No minimum | No minimum |
| Monthly payment | No mortgage payment, but you pay taxes, insurance and upkeep | Yes | None |
| Credit and income | Counseling required, and you must cover property charges | Lender checks both. Figure starts at 600 | Credit from 500, no income requirements |
| Cost | Typically costs more than other home loans | Figure origination up to 4.99% | Fee up to 4.9% ($2,000 minimum) plus closing costs, and a share of future value |
| Your balance | Grows over time | Shrinks as you pay | Settled later based on home value |
| Biggest catch | Due when you sell, move out or die | The payment, with your home as collateral | Gives up part of any appreciation |
| Where to start | HUD-approved counseling first | Check Figure’s Rate | Get My Point Offer |
Reverse mortgage details are for HECMs, per the CFPB. Point terms are Point’s own and vary by state and home.
Which one fits you
You can carry a payment and want the lowest cost
Go with a HELOC. Figure is quick to check, and our Figure HELOC review has the details.
You’re 62 or older, own your home outright and want no payment
A reverse mortgage fits, as long as you’re staying put and okay with a growing balance. Do the counseling and read the CFPB pages first. Our reverse mortgage pros and cons goes through the trade-offs.
You’re under 62, or you still have a mortgage you want to keep
You can’t get a HECM at your age, and a reverse mortgage would make you pay off the first mortgage. Point leaves the first mortgage alone, per Point.
You might leave the home to your kids
Run the numbers on each. A reverse mortgage balance grows, a HELOC balance shrinks, and an HEI settles on the home’s value. See our reverse mortgage alternatives and HELOC alternatives pages too.
You’re planning to move soon
Skip all three and look at selling. Fees on any of these make little sense if you’re leaving.
Check your offers
Looking at a number is free. Request a HELOC quote and a Point offer, then compare them against what the CFPB says a reverse mortgage costs.
Reverse Mortgage vs HELOC FAQs
It depends on whether you can carry a monthly payment. A HELOC usually costs less but requires credit and income and has a monthly payment. A reverse mortgage, available at 62 and older, has no monthly mortgage payment but typically costs more, and the balance grows over time. A home equity investment is a third route with no monthly payment.
Usually the HELOC. The CFPB says a reverse mortgage is typically more expensive than other home loans, with upfront costs, mortgage insurance and interest that all add to your balance. A HELOC has its own costs, such as Figure’s origination fee of up to 4.99%, but you pay the balance down instead of growing it.
A home equity loan gives you a lump sum that you repay in monthly payments, and the lender checks your credit and income. A reverse mortgage, for homeowners 62 and older, has no monthly mortgage payment and is repaid later, usually when you sell, move out or pass away. You still pay property taxes and insurance.
Not a HECM. The CFPB says HECMs are available only to homeowners 62 and older. Point says its home equity investment is available under 62, with credit scores from 500 and no income requirements.
Per the CFPB, the loan comes due after the last borrower dies. Heirs have 30 days after the notice to buy, sell or turn over the home, which can sometimes extend to six months. They can sell for at least 95 percent of the appraised value if the balance is higher than the home is worth, and mortgage insurance covers the rest.
