Reverse Mortgage vs. Home Equity Loan: Which One’s Right For You?

January 9, 2023

By Nikkael Home Loans

Reverse mortgages and home equity loans are viable options—especially for retirees, widowers, business owners, and others undergoing financial stress. But which one is right for you? We’ll tell you everything you need to know here.

What is a Reverse Mortgage?

Reverse mortgages offer seniors and non-traditional borrowers more versatility because they allow them to access the equity in their homes and freeze monthly payments. Although interest rates will continue to accrue over the loan term and must be paid off once the borrower dies or transfers ownership of the property, these loans help relieve financial pressure or free up additional funds.

What is a Home Equity Loan?

Essentially, a home equity loan allows borrowers to tap equity from their homes and use it to reinvest, pay for home renovations, or pay off high-interest debt.


As with any loan, lenders only approve reverse mortgage and home equity loan applications if borrowers meet minimum criteria.

Reverse Mortgage: To qualify for a reverse mortgage, borrowers must be at least 62 years old. Lenders will also review your credit history and income. It’s worth mentioning that even if you are approved for a reverse mortgage, you will still have to stay current with tax and homeowner’s insurance payments.

Home Equity Loan: Qualification standards for home equity loans vary with lenders. However, most review your debt-to-income ratio, credit report, income, and more.

Loan Terms

Most mortgages have a 10-30 year lifespan, but there is a significant distinction between the lifespan of reverse mortgages and home equity loans.

Reverse Mortgage: Reverse mortgages are unique in that they do not have a fixed lifespan and only end when the homeowner dies or transfers the property, and the loan, along with the accrued interest, is paid by the heirs of the surviving homeowner.

Home Equity Loan: Home equity loans have fixed terms, which can be as short as five years and as long as 30 years. Your balance will be paid in full at the end of that loan term.


As you'll see below, reverse mortgages and home equity loans have very different payment policies.

Reverse Mortgage: Reverse mortgages freeze monthly payments. However, interest rates continue to grow monthly—and that balance must eventually be paid. It's also worth mentioning that reverse mortgage borrowers are still responsible for paying taxes and homeowner's insurance.

Home Equity Loan: As with conventional loans, home equity borrowers must make fixed monthly payments that include interest for the loan term— typically five to 30 years.

Nikkael Home Loans: Your Reverse Mortgage and Home Equity Loan Specialist

Want to learn more about reverse mortgages or home equity loans? Nikkael Home Loans has 60 years of combined experience in mortgage law, loan origination, and home protection. Plus, we're attorney-owned and operated, so we have a higher level of ethics and accountability than you might find elsewhere. We can help you find the best loan option for you. Request rates to get started today!

Curious What Terms You Can Get?

Let’s find the right loan for you—contact your Orange County mortgage broker today!

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