Reverse Mortgage vs. HELOC: Which Is Right for You?
Both a reverse mortgage and a HELOC let you tap your home equity — but they work very differently. Here's a side-by-side comparison to help you decide.
Two Ways to Access Your Home Equity
If you're a Canadian homeowner 55+ sitting on significant home equity, you have options. Two of the most common are a Home Equity Line of Credit (HELOC) and a reverse mortgage. Both let you borrow against your home — but the similarities largely end there.
The Key Difference: Monthly Payments
This is the most important distinction.
- HELOC: You must make monthly interest payments (at minimum) from day one. If you draw $100,000 at a 7% rate, you're paying roughly $583/month in interest — every month, indefinitely.
- Reverse mortgage: No monthly payments. Ever. Interest accumulates and is added to your loan balance, repaid only when you sell or leave the home.
For retirees on a fixed income, this difference is enormous.
Side-by-Side Comparison
| Feature | Reverse Mortgage | HELOC |
|---|---|---|
| Monthly payments | None required | Yes — interest at minimum |
| Age requirement | 55+ | None |
| Credit score impact | Minimal | Significant |
| Income qualification | Not required | Required |
| Loan can be called | No | Yes — lender can reduce or freeze |
| Interest rate | Fixed or variable | Variable |
| Maximum access | Up to 55% of value | Up to 65% of value |
| No negative equity guarantee | Yes | No |
When a HELOC Makes More Sense
A HELOC may be the better choice if:
- You have reliable income to cover monthly payments
- You need short-term access to funds and plan to repay quickly
- You want the flexibility to borrow, repay, and borrow again
- You're under 55 and don't qualify for a reverse mortgage
When a Reverse Mortgage Makes More Sense
A reverse mortgage is often the better fit if:
- You're retired and living on a fixed income
- Monthly loan payments would strain your budget
- You want to stay in your home long-term
- You've been declined for a HELOC due to income or credit
- You want certainty — no risk of the lender freezing your credit
The Risk Factor
One often-overlooked risk with a HELOC: lenders can reduce your credit limit or call the loan at any time, particularly if your home value drops or your financial situation changes. This has happened to Canadian homeowners during market downturns.
A reverse mortgage, by contrast, cannot be called as long as you live in the home, maintain it, and pay your property taxes.
What About Interest Costs?
It's true that a reverse mortgage typically carries a slightly higher interest rate than a HELOC, and because interest compounds over time, the total cost can be higher over a long period. This is a real trade-off to consider.
However, for many retirees, the value of not having monthly payments — and the peace of mind that comes with it — outweighs the higher long-term cost.
Want to run the numbers for your specific situation? Book a free consultation and I'll show you exactly what each option would look like for you.
Explore Topics
Written by
Rachel
Content creator and writer sharing insights and stories.