A reverse mortgage is one way to use home equity in retirement. A home equity line of credit (HELOC) and selling the home are two others. Here is how they compare.
Reverse mortgage (HECM)
- No required monthly mortgage payment
- Must be 62+ and live in the home
- Balance grows over time; less equity left for heirs
- FHA-insured line of credit cannot be frozen or cut as long as you meet the loan terms
Home equity loan or HELOC
- Monthly payments start right away
- Qualifying is based on income and credit, which can be harder in retirement
- Lower upfront costs in many cases
- The lender can freeze or reduce a HELOC line
Selling and downsizing
- Frees up equity in cash
- Means moving, plus selling costs
- Can be paired with a HECM for Purchase to buy the next home with no monthly mortgage payment
The short version
If you want to stay put and a monthly payment would strain your budget, a reverse mortgage deserves a look. If you have strong income and only need a little cash for a short time, a HELOC may cost less. If the house no longer fits your life, selling may be cleanest. Steve will tell you which way the numbers point.
Talk to a real person in Kansas City
Steve Clune is a licensed loan officer for Kansas and Missouri. Call or text with your questions. If you miss him, send a text and he’ll get back to you.