Interest on a reverse mortgage “accrues” over time but is not payable until the homeowner sells or dies. With a HELOC loan, minimum monthly interest payments (and, at some point, principal repayments) begin the first month after the loan is taken. Thus, while you can initially increase monthly cash income by drawing down equity through a HELOC, this will be at least partially offset by increased loan payments.

For example, the interest-only monthly payment on a $10,000 HELOC loan balance would be $56.25, or $675.00 annually.

As money is drawn out for living costs, the loan balance grows and the required monthly payments also grow. Eventually, you will be using borrowed funds to make monthly payments and risk running out of money.

For shorter periods (under five years), using a HELOC may be preferable to a reverse mortgage because of the higher upfront fees. But for longer periods, the reverse mortgage will be the better mortgage tool for supplementing retirement income.

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A Few More Related Articles of Interest:

Reason 3: You Don’t Need Income to Qualify fo a Reverse Mortgage

Reasons Why People Don’t Choose Lifetime Payments

HECM Line of Credit Gains in Popularity Among Reverse Mortgage Borrowers

Reverse Annuity Mortgage Can Be a Sensible Strategy

Reason 2: With a Reverse Mortgage There is No Risk of “Losing the House”