Last reviewed: 3 October 2026
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HECM, HELOC and home equity loans
These are three different ways to borrow against the equity in a home. They differ in how the money is paid out, how it is repaid, and what the sources say about each. This page sets out what the official sources say, side by side.
What this term means: Home equity is the value of your home minus the amount you owe on your mortgage.[5] The three products below let a homeowner borrow using that equity.
The three products side by side
| HECM (reverse mortgage) | HELOC | Home equity loan | |
|---|---|---|---|
| What it is | A special type of home loan for homeowners 62 and older, with the amount owed going up over time.[1] The HECM is the FHA’s reverse mortgage program and the only reverse mortgage insured by the federal government; it is available only through an FHA-approved lender.[2] | An “open-end” line of credit that allows you to borrow repeatedly against your home equity.[5] | A loan that allows you to borrow money using the equity in your home as collateral.[6] |
| How funds arrive | HUD says a HECM enables you to withdraw a portion of your home’s equity for home maintenance, repairs, or general living expenses.[2] | Generally you can spend up to your credit limit anytime during the borrowing period, also called the draw period (which could last 10 years, for example). Typically you draw with special checks or a credit card. Some plans require a minimum amount each time you borrow or an initial amount when the line is set up.[5] | A lump sum.[6] The CFPB says home equity loans and HELOCs, if you already have a mortgage, are considered second mortgages that you pay in addition to your first mortgage.[7] |
| What the sources say about the amount | For a HECM, HUD says the amount available varies by borrower and depends on the age of the youngest borrower or eligible non-borrowing spouse, the current interest rate, and the lesser of the appraised value, the HECM FHA mortgage limit, or the sales price.[2] | The CFPB says that if your home’s value decreases significantly, the lender might not allow additional credit, and that the lender might freeze your ability to take out more funds if your financial circumstances change.[5] | The cited sources do not describe how the amount is set. The CFPB says home equity loans may have upfront fees and costs.[6] |
| Repayment | The CFPB says a reverse mortgage generally must be repaid when you sell or no longer live in the home, and may need to be repaid sooner, for example if you fail to pay property taxes or homeowner’s insurance or fail to keep the home in good repair.[1] HUD says HECM borrowers may reside in the home indefinitely as long as property taxes and homeowner’s insurance are kept current.[2] | After the draw period you enter the repayment period, and the lender may set a schedule to repay the full balance, often over 10 or 20 years. The CFPB says monthly payments are often significantly higher in repayment, and in some cases the whole amount borrowed may have to be repaid as soon as the repayment period begins.[5] | You repay the amount borrowed.[6] The cited sources do not describe a repayment schedule. |
| If payments are not kept up | The CFPB says to act quickly if you receive a notice of default or foreclosure, and lists failing to pay property taxes or insurance among reasons a reverse mortgage may need to be paid back sooner.[1] | The CFPB says that if you fall behind or cannot repay on schedule, you could lose your home.[5] | The CFPB says that if you cannot pay back the loan, the lender could foreclose on your home.[6] |
| Counseling | Required for a HECM: the borrower, any eligible or ineligible non-borrowing spouse, and any non-borrowing owner must receive counseling, and the counselor gives a certificate that the borrower provides to the mortgagee.[3] | The CFPB says that if you are having trouble paying your mortgage, talk to a housing counselor before taking out a home equity loan or HELOC.[7] | The CFPB says that before taking out a home equity loan to consolidate debts, talk to a qualified credit counselor.[6] |
Other kinds of reverse mortgage
The CFPB says there are three kinds of reverse mortgage: those insured by the FHA, proprietary reverse mortgages that are not FHA-insured, and single-purpose reverse mortgages offered by state and local governments. Most reverse mortgages today are HECMs. Proprietary loans are not insured by the federal government and are typically designed for borrowers with higher home values. Single-purpose loans may be used only for the purpose the lender specifies, may be available only in some areas, and may be only for homeowners with low to moderate income.[4] This page is about the HECM.
Cancelling a home equity loan after closing
The CFPB says that for most non-purchase-money mortgages, which it says include refinances and home equity loans, you have a right to cancel (the right of rescission) for three business days after the mortgage documents are signed, with the clock starting only once certain events have occurred.[8] See our guide to the right of rescission. The cited sources do not say whether the same right applies to a HECM or a HELOC, so ask your lender and read the notice you are given.
How to verify this yourself
Read the CFPB and HUD pages and the regulation in the reference list; they are the source for each statement above. For a reverse mortgage, HUD lists counselors through the HECM Counselor Roster and a phone line, and warns that scam artists charge thousands of dollars for information that is free from HUD.[2] Our reverse mortgage marketing checklist compares a pitch with these sources, and how to find a HUD-approved housing counselor explains the search. For any of the three, read the lender’s disclosures and your Loan Estimate or other required disclosures, and confirm the loan officer’s license (how to verify an NMLS license).
What this page does not cover
This page is general information, not legal or financial advice. It describes how three products are structured; it does not say which, if any, suits a particular homeowner, and it does not compare lenders, rates or fees. Eligibility depends on the borrower’s facts and each lender’s and program’s rules, and the cited sources do not list eligibility criteria for a HELOC or a home equity loan. It does not cover HECM fees, mortgage insurance premiums, interest rate types for any of the three, or what happens to a HECM after the borrower dies. The CFPB reverse mortgage page was last modified 25 September 2026; this page was last reviewed 3 October 2026.