Both tap your home equity, but they work very differently. Here is a clear side-by-side comparison.
How do reverse mortgages and home equity loans differ?
The core difference is repayment. A home equity loan gives you a lump sum that you repay in fixed monthly installments over a set term, like a second mortgage. A reverse mortgage requires no monthly payments; the balance grows and is repaid only when you sell, move out, or pass away. Home equity loans require qualifying income and good credit, while reverse mortgages have no income-based payment requirement (though a financial assessment confirms you can cover taxes and insurance). Reverse mortgages are limited to age 62+; home equity loans are not. Call 1-800-MEDIGAP to compare for your case.
Which is cheaper, a reverse mortgage or home equity loan?
Home equity loans generally have lower upfront costs and interest rates than reverse mortgages, which carry origination fees and FHA mortgage insurance premiums. However, the home equity loan's monthly payment strains a fixed retirement income, and the loan must be repaid even if your circumstances change. A reverse mortgage costs more upfront but frees monthly cash flow. The cheaper option depends on how long you stay and whether monthly payments are affordable. A specialist at 1-800-MEDIGAP can model both side by side for your numbers.