Reverse mortgage vs HELOC: which costs less?
A HELOC usually has a lower rate, but you pay interest every month from your income. A reverse mortgage has no monthly payments, but its interest is added to the loan and compounds. The right choice depends on your monthly budget and how long you'll borrow.
| Over 10 years | HELOC | Reverse mortgage |
|---|---|---|
| Monthly payment | — | — |
| Total paid from your income | — | — |
| Owed at the end | — | — |
| Total interest cost | — | — |
Interest cost over time
The HELOC figures assume interest-only payments at a steady rate. HELOC rates are variable and usually follow the prime rate. The lender can also lower your limit or ask for repayment, which can't happen with a reverse mortgage while you meet its terms.
How they compare
| Reverse mortgage | HELOC | |
|---|---|---|
| Monthly payments | None required | At least the interest, every month |
| Minimum age | 55 | None |
| How you qualify | Mainly your home, age and location | Income and credit score |
| Interest rate | Higher | Lower, usually variable |
| Borrowing limit | Up to 55% of home value | Up to 65% of home value |
| Can the lender reduce or call it? | No, while you meet the terms | Yes |
Read the full reverse mortgage vs HELOC guide.
Questions about this comparison
Is a HELOC cheaper than a reverse mortgage?
Usually the rate is lower, so the total interest is often lower too. But a HELOC needs monthly payments from your income, and you need enough income and good credit to qualify. A reverse mortgage costs more over time but needs no payments.
Can I switch from a HELOC to a reverse mortgage?
Yes. Many people use a reverse mortgage to pay off a HELOC so they no longer have monthly payments. The HELOC balance is paid off when the reverse mortgage is set up.