If you’ve owned your home for a while, you’re probably sitting on one of your largest financial assets: your equity. The good news is that you don’t need to put a “for sale” sign in the yard to put that equity to work.
The two most popular ways to convert home equity into usable cash are the home equity line of credit (HELOC) and the reverse mortgage. They seem similar – both let you borrow against the value of your home while you live in it – but they’re designed for very different homeowners, at very different stages of life. Here’s a side-by-side look so you can decide in a few minutes.
Option 1: Reverse Mortgage
If you’re age 62 or older, the equity in your home can turn into cash you can use right now. A reverse mortgage allows eligible homeowners to convert a portion of their home equity into funds while maintaining ownership of their home.
How it can help you:
- Clear your monthly budget No required monthly mortgage payments*
- Cover everyday expenses or build an emergency cushion
- make home improvements
- Supplement your retirement income and fund the lifestyle you want
Option 2: HELOC (Home Equity Line of Credit)
A home equity line of credit (HELOC) lets you use your home’s equity to consolidate high-interest debt, fund home improvements, or cover a large expense – usually at a lower rate than a credit card or personal loan.
Money.com’s home equity table lets you compare current HELOC rates and offers from multiple lenders in one place, so you can see what you might qualify for in just minutes.
Side by Side: How They Really Compare
| reverse mortgage | heloc | |
|---|---|---|
| what’s that for | homeowners 62 years and above | homeowner of any age who qualify on income and credit |
| monthly payment | No required monthly mortgage payments* | Monthly payment required |
| how do you get money | Lump sum, monthly advance, or a line of credit | A revolving line of credit that you draw on as needed |
| when it gets paid | When you sell, move out permanently, or pass away | Over time, during and after the draw period |
| What lenders care about most | Your age, home value and equity | Your Income, Credit and Equity |
| specific cost | Closing costs and fees apply; Equilibrium increases with time | often a Lower rates than credit cards or personal loans |
| best when you want | Stay in your home and have easy monthly cash flow in retirement | Borrow flexibly and repay while you earn |
So which one is right for you?
A reverse mortgage may be suitable if you…
- Are 62 or older And plan to stay in your home for a long time
- want stop making monthly mortgage payments And free up your budget*
- Are retired or on a fixed income and want to make ends meet without new monthly bills
- Care more about cash flow rather than preserving every dollar of equity today
A HELOC may be a fit if you…
- want Flexibility – Borrow only what you need and reuse the line when paying
- to pass income and debt Easy monthly payments
- take it specific goal: Consolidate, renew high-interest debt, or cover a one-time expense
- Want a lower rate on your credit card – and compare multiple lenders first
bottom line
This is often based on two questions: How old are you and do you want monthly payments?
if you’re Individuals 62 or older may not want to make monthly mortgage paymentsA reverse mortgage is designed for exactly that. if you’re Still earning, want flexibility and are comfortable paying off your credit card at a lower rateA HELOC potentially gives you more control. Either way, the equity is already yours – the only question is how you want to use it.
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Frequently Asked Questions
How much can I get from a reverse mortgage?
It depends on the age of the youngest borrower, the value of your home, and current interest rates – generally, the older you are and the more equity you have, the more you can use. The FHA sets the annual borrowing limit for the most common (HECM) reverse mortgage, and your exact figure is confirmed during the application.
What disqualifies you from a reverse mortgage?
Common barriers include being under 62 years of age, not having enough equity, the home not being your primary residence, unpaid federal loans, or being unable to pay property taxes, homeowners insurance and maintenance. A reverse mortgage specialist can tell you where you stand.
How much can I borrow from a HELOC?
Many lenders allow you to pay up to about 85% of your home’s value, plus the amount you still owe on your mortgage (your combined loan-to-value). The exact amount depends on your equity, income and credit profile.
What credit score do I need for a HELOC?
Many lenders look for a score of low-to-mid 600 or higher, with the best rates going to those with strong credit. Comparing multiple lenders online is the fastest way to see what you really qualify for.
Reverse Mortgage or HELOC – Which is Cheaper?
HELOCs often carry lower upfront costs and lower rates than many alternatives, but they require monthly payments. Reverse mortgages eliminate monthly payments* but typically have higher fees and balance amounts that grow over time. The “cheap” option depends on your age, how long you’ll live in the home, and whether you can make the monthly payments.
*With a reverse mortgage, there are no required monthly mortgage payments, but you remain responsible for property taxes, homeowner’s insurance and home maintenance. The loan balance grows over time as interest and fees add up, reducing the home equity available to you and your heirs. The loan becomes due when the last borrower sells the home, no longer lives in it as a primary residence, or dies. Reverse mortgages are not a government benefit. Eligibility requirements apply, and potential borrowers are encouraged to speak to a HUD-approved counselor before proceeding.
This content is for informational purposes only and is not financial, tax or legal advice. Rates, terms and eligibility vary by lender and are subject to change. Compare offers and confirm details directly with the lender before applying.
Introduction Credit card offers, including APR periods, rewards rates and annual fees, are subject to card issuer terms and subject to change. Reward categories and 0% intro APR periods vary by card; Review the issuer’s terms for current details before applying.