Reverse Mortgage vs. HELOC vs. Downsizing

Comparing Options for Accessing Home Equity in Retirement

If you're retired or close to it and you want to tap your home equity, you generally have a few paths. Three common ones are a reverse mortgage, a home equity line of credit (HELOC), and downsizing to a smaller home. None is "best" for everyone — they each fit different goals. Here's a plain-language look.

Reverse mortgage

A reverse mortgage is a loan for homeowners 62+ (some proprietary products allow 55+) that converts part of your home equity into cash. Key features grounded in how these loans work:



• No required monthly mortgage payment. The balance grows over time and is repaid later — when you sell, move out permanently, or pass away.
• You keep ownership and stay in the home, as long as you meet your obligations (taxes, insurance, upkeep, primary residence).
• Flexible disbursement: lump sum, monthly payments, a line of credit, or a combination.
• Non-recourse protection and, for HECMs, FHA insurance and a required counseling session.
• Trade-off: the balance grows and equity typically decreases over time.

A Standard HELOC (home equity line of credit) Option

A traditional forward HELOC is a revolving line of credit secured by your home. Compared with a reverse mortgage, a HELOC generally does require monthly payments and typically has qualification standards based on income and credit. It can be flexible for shorter-term needs, but the payment obligation is a key difference for retirees on a fixed income.

Downsizing

Downsizing means selling your current home and buying (or renting) something smaller or less expensive, freeing up equity in the process. It can simplify upkeep and lower costs, but it also means moving — which isn't what every homeowner wants.

Notably, a HECM for Purchase can combine the two ideas: it lets a borrower 62+ buy a new primary residence using a reverse mortgage, typically with a substantial down payment (often 40–60%) and no required monthly mortgage payment.

A simple way to think about it

• Want to stay in your home without a monthly mortgage payment? A reverse mortgage is built for that goal.
• Comfortable making monthly payments and want flexible short-term access? A HELOC may fit.
• Open to moving for lower costs or a more suitable home? Downsizing — or a HECM for Purchase — may be worth exploring.

The honest caveat

Each option has trade-offs, and the details (terms, eligibility, costs) vary by lender and by your situation. This is exactly the kind of decision worth reviewing with professionals.

Reach out to Linda for a free, no-obligation conversation to talk through which path fits your goals — and consider speaking with a financial, tax, or legal advisor as well.