Hi, everyone! This month we'll talk about the money in your home. Reverse mortgages seem popular, so I thought you would like to know about another product that may make more sense and be easier to deal with. Keep in mind we don't offer any mortgage, so this is just some good information that may help you so you don't get wrapped up in something that's not right for you.
Why a HECM Might Beat a HELOC
1. A HECM OFFERS FLEXIBLE REPAYMENT OPTIONS.
With a HECM, a "reverse mortgage," the borrower can significantly increase their cash flow — not only from the loan proceeds they receive (e.g., a lump sum disbursement at closing or by drawing available proceeds as needed from a line of credit) — but also from the flexible options they have to repay the borrowed money. The borrower can repay as much or as little toward the loan balance each month as they want, or they can choose to make no monthly mortgage payment at all. Of course, they still must maintain the home and pay property taxes and homeowners insurance.
The loan balance doesn't have to be repaid until the last remaining borrower moves out or passes away and is typically satisfied through the sale of the home. If the borrower's heirs want to purchase the home, they can by paying 95% of the appraised value or paying off the loan balance, whichever is less. They can also choose to refinance the home into their name or simply walk away (in which case the home is usually sold on the open market).
With a HELOC, the borrower can draw funds as needed from the available credit line and is typically required to make monthly payments on just the interest that is accrued for a set number of years (e.g., the first 10 years) during what is called the draw period. For borrowers who are aged 62+, the burden of required monthly payments can diminish cash flow during a phase of their life when income tends to be fixed or dwindling.
2. THE UNUSED PORTION OF THE HECM CREDIT LINE GROWS OVER TIME
With a HECM line of credit, as long as the borrower does not fully draw the HECM loan, the unused portion of the credit line grows at the same compounding interest rate as the loan balance (independent of swings in the value of the home) — giving the borrower access to even more funds over time. For this reason, it can be valuable to establish the HECM line of credit sooner rather than later.
With a HELOC, the unused portion of the line of credit does not grow over time.
3. THE HECM CREDIT LINE CANNOT BE FROZEN, REDUCED, OR CANCELED.
With a HECM line of credit, as long as you meet the loan terms, no one — including the lender — can freeze, reduce, or cancel your line of credit, even if your financial situation suddenly changes or your home drops in value.
A HELOC offers no such protections.
So, I hope this helps. Feel free to reach out to your Advisor with any questions. We have great referral sources if you need help with these programs. Cheers!
By Marc Frye
Marc Frye provides financial analysis and market commentary for the ARA newsletter, translating complex economic trends into actionable insights for retirees.
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Easy Eddie's Take
Marc's comparison here is really helpful, especially since a lot of people ask me, "What's the difference between a reverse mortgage and a home equity line of credit?" The key thing to understand is that a Home Equity Conversion Mortgage (HECM) is the only reverse mortgage insured by the Federal Housing Administration, and in 2026, you need to be at least 62 years old to qualify. The amount you can borrow depends on your age, current interest rates, and your home's appraised value, with limits up to $1,149,825 for 2026.
Here's what surprises most people: with a HECM line of credit, that unused credit line grows every year at the same rate as your loan balance. So if you get approved for $200,000 but only use $50,000, that remaining $150,000 keeps growing. Think of it as a financial safety net that gets bigger over time. Traditional HELOCs from banks don't do this, and they can actually reduce your credit line if your home value drops or your financial situation changes.
The flexibility Marc mentions is real, but remember that HECM borrowers still need to pay property taxes, homeowner's insurance, and maintain the home. Once you understand how these work, the choice becomes much clearer for your specific situation.