Reverse Mortgage vs HELOC

For elders of age 62 or above home is the biggest source of wealth. At some point in life, you’ll probably need money for your medical bills, home improvement, daily needs, and unexpected large expenses. What will you do if you don’t have enough money for all these expenses in your account?

Fear not! I have a solution for you.

If you own a house, you have the option of getting a home equity line of credit (HELOC) or reverse mortgage (RM). You may not have millions of dollars in your retirement account, but with these financial solutions, you can borrow some amount against the equity in your home.

The cash you get from these loans will help you with your everyday expenses, home improvement projects, regular bills or almost any other need.

Reverse Mortgage vs HELOC

A reverse mortgage is a loan that allows homeowners 62 and older to convert a part of their house equity into cash. In this instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.

Moreover, the proceeds from a reverse mortgage may be tax-free and you choose can spend these proceeds in any way you want. You can continue to live in your home without any monthly installments or payments.

HELOC (home equity line of credit)

HELOC stands for a home equity line of credit, or simply known as “home equity line.” It is a loan in which the lender agrees to lend a maximum amount against home equity for an agreed period between lender and borrower.

You can use home equity credit lines only for major expenses like education, home improvements, or medical bills. The structure and fees can vary from bank to bank, but the amount of money you can borrow depends upon your credit score.

HELOC has two stages that are the draw period and the payback time. During the draw period, you can take out the money as needed by using a credit card or debit card. You need to pay interest on the amount that you take out from the accessed money.  What is the difference between both; this is one of the opens in a new windowmost frequently asked questions for a reverse mortgage

Now, I Am Going To Explain You The Difference Between Above Mention Home Equity Loans based on Various Factors. Here is opens in a new windowhow a reverse mortgage works and how HELOC differs from it.  

Equity Requirements

  • Reverse Mortgage: Homeowners must be age 62 or older. Home should be their primary residence. Also, there should be the availability of financial resources to cover insurance, maintenance, and tax expenses.
  • HELOC:  There is no age limit for HELOC. The only condition is that the person should have at least 20% equity in his home before applying for HELOC. 

How You Get Paid

  • Reverse Mortgage: You can access the income or payments from the reverse mortgage either in a form of the lump-sum amount or regular monthly installments. You can also go for a combination of both.
  • HELOC: With many HELOCs, you can borrow as much as you want, according to your credit limit. You receive the loan amount as a single lump-sum payment that you can withdraw according to your need with credit or debit card.

Repayment Schedule

  • Reverse Mortgage: You need to pay installments until you are the alive or primary residence of your home. When the borrower move from the house for more than one year or he sells the home at that time he may need to repay the loan amount.
  • HELOC: In this type of home equity the borrower needs to pay the monthly interest payments once owe the money.

Credit Score and Income Status

  • Reverse Mortgage: There are no income requirements to opens in a new windowqualify for a reverse mortgage. But, some lenders may check if you are capable of making timely payments for property charges including taxes, homeowners’ association fees, insurance, and so on.
  • HELOC: For applying for HELOC you should have a good credit score and proof of your steady income to ensure that you are capable of making all financial needs.


Reverse mortgages and HELOC all allow you to convert your home equity into cash. So, how will you decide which loan type is best for you?

In my opinion, a reverse mortgage is a better choice if you want to secure your expenses and looking for a long-term fix income source.

Unlike HELOC, a Reverse mortgage doesn’t require a credit score from you also you don’t need you to pay a monthly installment while you are alive. But borrowers need to pay their homeowners insurance, taxes and maintenance charges for their home.

For some people, it is the best income planning tool and a lifeline for others.

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