Quick Answer
A HELOC is usually cheaper to set up but needs monthly payments and depends on your income and credit. A reverse mortgage, only for homeowners 62 and older, needs no monthly mortgage payment, but its balance grows over time and its closing costs are typically higher. With either, you could lose your home if you don't keep the terms.
Do you have to make monthly payments?
With a HELOC, yes. Most HELOCs have a variable rate, so the payment can change from month to month, and it's often much higher once the repayment period starts.
With a reverse mortgage, there's no monthly mortgage payment. You repay the loan all at once when you no longer live in the home. But you must keep paying property taxes and homeowners insurance and keep the house in good repair. If you can't, you could face foreclosure.
Which costs more?
The CFPB says a home equity loan or HELOC might be a cheaper way to borrow against your equity. Reverse mortgage closing costs are typically higher, largely because reverse mortgage borrowers pay mortgage insurance.
Who can get each one?
A reverse mortgage is only for homeowners 62 and older. A HELOC has no age rule, but qualifying depends on your income and credit, because you'll be making payments.
What happens to what you owe over time?
With a HELOC, you pay the balance down during repayment. With a reverse mortgage, interest and fees are added to the balance every month, so what you owe grows every month. That leaves less equity for you or your heirs later.
Common Questions
Do I make monthly payments on a reverse mortgage?
Not on the loan itself. You repay it all at once when you no longer live in the home. You still pay property taxes, homeowners insurance and upkeep.
Can I cancel either one after signing?
Usually, yes. Most reverse mortgages, and HELOCs on the home you live in, come with a three-day right to cancel after closing.
Sources
This guide is general information, not advice about your situation.