The short answer
A reverse mortgage is a loan for homeowners 62 and older: interest accrues, the balance grows, and it's repaid when you sell, move out, or pass away. A home equity investment has no age minimum and no interest, but takes a share of your home's value, usually within 10 to 30 years.
If you're 62 or older and plan to stay in the home for life, a reverse mortgage is built for that. If you're younger, or expect to sell within a set period, an HEI may fit better.
Side by side
| Home equity investment | Reverse mortgage | |
|---|---|---|
| Age requirement | None | 62 and older for the most common type (HECM) |
| Monthly payment | None | None on the loan; you still pay taxes, insurance, and upkeep |
| How it costs you | A share of your home's value or gain at settlement | Interest and mortgage insurance that accrue onto the balance |
| Existing mortgage | Stays in place | Usually must be paid off with the proceeds |
| Type of home | Usually your primary residence; some providers allow second homes | Your primary residence |
| When it ends | At the end of the term (10 to 30 years) or when you sell, refinance, or buy out | When you sell, move out, or pass away |
| Your home's appreciation | You give up a share | You keep it, minus the growing loan balance |
When a reverse mortgage fits
- You're 62 or older and plan to live in the home long term.
- You want no fixed end date forcing a sale.
- You're comfortable with the loan balance growing over time.
When an HEI fits
- You're under 62, or don't want to pay off your existing mortgage.
- You expect to sell or refinance within 10 to 30 years.
- You'd rather share future value than have interest compound against the home.
What an HEI actually costs
In our standard example ($100,000 against a $750,000 home with a $300,000 mortgage, 4% growth, 7 years), the home equity investments we can model cost 14.1% to 15.9% a year. The cost depends heavily on how much your home appreciates. Compare every provider or run your own numbers.
Questions
Can I get an HEI if I'm over 62?
Yes. HEIs have no age requirement, so older homeowners can compare both options.
Do I have to pay off my mortgage for an HEI?
No. An HEI sits behind your existing mortgage, though providers limit how much total debt and investment the home can carry.
Which leaves more for my heirs?
It depends on how long you hold it, your home's appreciation, and the terms. A reverse mortgage balance grows with interest; an HEI claims a share of value. Compare the projected amount owed under both at the time you expect to settle.
Run your own numbers
Every figure here uses a standard example. The calculator runs your home, your mortgage, and your assumptions through every provider at once.
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