Reverse Mortgage vs Cash-Out vs HELOC: The Best Way to Tap Home Equity at 62+ (2026)

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Three ways to tap equity at 62+

If you are sixty-two or older and equity-rich, you have three ways to turn that equity into cash without selling: a reverse mortgage, a cash-out refinance, or a home equity line of credit. They all hand you money, but they differ sharply on whether you make a monthly payment, how lenders judge your income, and what is left for your heirs. Picking the wrong one can cost you tens of thousands.

The payment trade-off

This is the fork that decides everything. A reverse mortgage requires no monthly payment while you live in the home, but the balance grows over time and eats into your equity. A cash-out refinance and a HELOC keep your equity growing because you pay the loan down, but they add a monthly payment you must qualify for, and fixed retirement income can make that hard to clear.

How a reverse mortgage works

The most common reverse mortgage is the HECM, insured by the federal government and available only at sixty-two and older. Instead of you paying the lender, the lender pays you, and the balance is repaid when you sell, move out, or pass away. You keep the title, but you must keep paying property taxes, homeowners insurance, and upkeep, and complete HUD-approved counseling first. In 2026 the lending limit is one million two hundred forty-nine thousand dollars.

How a cash-out refinance works

A cash-out refinance replaces your mortgage with a larger one and hands you the difference. On a four hundred thousand dollar home where you owe one hundred sixty thousand, refinancing to the standard eighty percent ceiling could free roughly one hundred sixty thousand in cash before costs. The catch for retirees is qualification: it is a full mortgage, so the lender reviews income and debt-to-income, and fixed income is the usual hurdle.

How a HELOC works

A HELOC is a revolving line secured by your home, like a credit card backed by your house. You draw what you need during the draw period and pay it back later, usually at a variable rate. It keeps your existing first mortgage and its rate intact, which is why homeowners with a low rate prefer it, but the payment can jump when the repayment period begins.

How much each one unlocks

Roughly, a cash-out refinance and a HELOC both let you reach about eighty percent of your home value minus what you owe, so the more equity you hold, the more you can tap. A reverse mortgage is different: the amount is set by your age and current rates, and any existing mortgage is paid off first from the proceeds, which lowers the cash you actually receive.

Which option fits your situation

If you want to erase a monthly payment and stay in the home for years, a reverse mortgage fits. If you have steady income and want one fixed payment with a lump sum, a cash-out refinance works. If you already have a low first-mortgage rate and want flexible, as-needed access, a HELOC is the lighter touch. If you plan to move soon, the high upfront cost of a reverse mortgage usually makes it the wrong call.

Costs and what is left for heirs

Every option trades some equity for cash today. A reverse mortgage grows its balance over time, leaving less for heirs, though it is non-recourse, so they never owe more than the home is worth. A cash-out refinance and a HELOC keep equity building as you repay, but the monthly payment is the price. Decide how much of your equity you are comfortable spending before you sign.

How to choose and get started

Start by pinning down your equity and whether a monthly payment is welcome. Match the cash to the need: a lump sum for a one-time cost, a line for ongoing needs. Factor in how long you will stay. Then compare real offers on rate, fees, and total cost, and for a reverse mortgage complete the required counseling. The link below opens our full breakdown so you can run your own situation.