Homeowners have multiple avenues to look into if they want to tap their home equity. A home equity line of credit (HELOC) is one such tool, and while this line of credit offers flexible financing, it does so at a lower interest rate relative to other borrowing options. 

As the Federal Reserve tries to tackle ongoing inflation, it has kept the federal funds rate frozen. Even so, HELOC interest rates have dropped considerably in the past year, falling two percentage points since September 2024. Currently, HELOC rates are averaging about 8%. Average credit card interest rates are nearly triple that rate, coming in close to 22%. 

Senior homeowners may have another financing option at their disposal, too: a reverse mortgage. With a reverse mortgage, seniors can transform the equity in their home into cash, but without the same monthly payment obligations as a HELOC. However, each loan product has pros and cons. We spoke to home lending experts to provide insights into how HELOCs and reverse mortgages work, and what to consider with each. 

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HELOC vs. reverse mortgage: What seniors should consider now

Eligible senior homeowners who are considering borrowing against their home's values can look into a home equity line of credit or a reverse mortgage. HELOCs give borrowers access to a credit line for a set period of time. During this draw period, you can use the funds, then repay and repeat. After the draw period, you enter your repayment period. 

Reverse mortgages are typically available to senior homeowners 62 and up. When you tap into your home's equity with a reverse mortgage, you receive a portion of the equity as either monthly payments or a lump sum payment. You don't repay the money you borrow, though, until you die, move or sell the home. This allows you to tap into your home's equity without adding another monthly payment to the mix. 

In exchange, reverse mortgage lenders tack on interest charges and fees. You're still on the hook for taxes and insurance, too, and are required to keep the home in good condition. The loan is repaid by selling the home as an asset or through funds from the estate. 

So, the short answer is that both a HELOC and a reverse mortgage are financing tools, but they work very differently. Below, we'll cover some situations when one may be a better fit than the other. 

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Why a HELOC could be better for seniors now

A home equity line of credit may be a better option if your financing needs are more short-term. Whether that's making strategic improvements to your home or paying off debt, a HELOC can be beneficial. 

After all, other short-term borrowing options come with rates that are sky-high right now. For example, credit card APRs have seen a major spike over the past few years and now exceed 21%. Average personal loan rates are around 12%. 

Given where HELOC interest rates are at right now at about 8%, they're a solid, affordable alternative to other costly options. Seniors who also want to maintain their low mortgage rates may benefit from a HELOC. 

"A HELOC is a great way to have a temporary fix if you have a first mortgage right now with a 2% interest rate. You're not going to refinance your mortgage, but you want to access cash. You can do a home equity line of credit for 30,000 or 50,000 to get a new roof put on or a new kitchen," says Christopher Thomas, a mortgage loan originator with Iris Mortgage.

In the current climate, doing necessary upgrades or ones that elevate the value of your home can be a good idea. Home renovation costs are projected to increase due to tariffs. But when comparing a HELOC vs. a reverse mortgage, the major differentiation is repayment. 

"If a borrower can afford the monthly payment of a HELOC, then this would be my first choice," says Jill Carrade, a mortgage broker at Pro Mortgage. 

Why a reverse mortgage could be better for seniors now

A reverse mortgage is ideal for seniors who may have limited financial resources, as no payment is required. So if you have little to no work or retirement income, a reverse mortgage can be a lifeline and a tool to age in place. A home equity loan or HELOC may not be the right fit, as they require payments. 

"I see the reverse mortgage as more of an income source or supplement if Social Security is not enough to live on," says Thomas. 

If you meet the reverse mortgage eligibility requirements, you can turn your home equity into cash and help you navigate this high inflation environment. Though you can receive funds and not have a payment, a reverse mortgage chips away at your home equity. 

"The con of a reverse mortgage, if looked at incorrectly, is that the loan balance goes up every month. However, if it keeps someone in their home so they don't have to pay rent somewhere, it's actually a positive," says Mark Worthington, a loan officer and branch manager at Churchill Mortgage. 

A reverse mortgage helped Worthington's parents stay in their home. His parents were looking at potentially selling their home after his mom got deep into consumer debt. She was dealing with early-onset dementia and their retirement funds weren't enough to make payments. 

"She was getting credit cards to pay credit cards to pay credit cards. So I said that I'm going to help them with the reverse mortgage so they can stay in their home," says Worthington. "We secured the reverse mortgage. We paid off the credit card debt, we built a wheelchair ramp for the house…and completely eliminated their debt." 

In this case, a reverse mortgage helped pay off high-rate debt without needing to sell the home. It also allowed his parents to stay in their home without making any payments until they both passed away. 

"Just like in any regular mortgage, if they move out or pass, the heirs are given the ownership of the home. They merely have to pay off the mortgage and that works exactly the same with a regular mortgage or a reverse mortgage," explains Worthington.

A reverse mortgage may be ideal for senior homeowners with limited assets and resources. However, Worthington notes that it's only worth it as a long-term solution, not a short-term acquisition of funds. That's because reverse mortgages tend to have steeper costs than HELOCs. Some upfront costs you have to pay can include origination fees, closing costs, and an initial mortgage insurance premium.

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The bottom line 

If you want to borrow home equity and take advantage of rising home values, a HELOC and a reverse mortgage are two unique options. HELOCs may be better suited for those who need short-term funds and can repay what's owed. A reverse mortgage may be ideal for those who want to stay in their home and have limited financial resources. 

But before submitting a HELOC or reverse mortgage application, consider the pros and cons of each and talk to a professional and check out multiple home equity lenders. "Every borrower has a different situation, make sure you go to a broker who does all different types of loans to help you analyze your personal choices," says Carrade.