HELOC vs. Reverse Mortgage (HECM): A Senior's Guide 2026

Preserving Cash Flow in Retirement

If you are retired and on a fixed income, inflation is your enemy. Tapping into your home equity can provide a necessary buffer. The two main tools—HELOC and HECM (Home Equity Conversion Mortgage)—function in opposite ways.

The Monthly Payment Factor

• HELOC: You must make monthly payments (interest-only or P&I). If you stop paying, you lose the house.
• Reverse Mortgage: You make NO monthly mortgage payments. The bank pays you (or gives you a line of credit). The interest is added to the loan balance each month.

Qualifying: Income vs. Equity

• HELOC: You need verifiable income (pension, social security) high enough to support the debt payments. If your income is low, you will be denied.
• Reverse Mortgage: There are no strict income requirements because there are no payments to make. You just need to pay property taxes and insurance.

The End Game

With a HELOC, your equity decreases only by the amount you borrow. With a Reverse Mortgage, your equity erodes faster because the unpaid interest compounds on top of the balance.

Best For HELOC: Young retirees (62-75) who want a safety net for emergencies but intend to leave the home to heirs.

Best For Reverse Mortgage: Older retirees (75+) who need to eliminate their monthly mortgage payment entirely to survive and aren't concerned about leaving a large inheritance.