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A home equity investment and a reverse mortgage both pay you cash with no monthly payment, so they get confused. They differ on who can use them, how the cost grows and how each one ends.
If you want cash from your home without adding a monthly payment, a home equity investment (HEI) vs reverse mortgage is usually the first comparison you face. Both pay you cash with no monthly payment, which is why they get mixed up. The real differences are who can use each one, how the cost grows, how each one ends and whether counseling is required.
A reverse mortgage is a loan, and it is only for homeowners 62 and older, and it comes due when the last borrower sells, moves out or dies. You make no monthly payment on it. Instead, interest is added to the balance each month, so what you owe grows over time and your equity shrinks. Before a federally insured reverse mortgage can begin, HUD requires counseling with an approved counselor, and California law requires it for any reverse mortgage on a California home.
The catch is what it leaves behind. Because the balance grows, there is less for your heirs. If they want to keep the home they have to pay off the loan. With a federally insured reverse mortgage, what they owe is capped when the balance has grown larger than the home is worth; other reverse mortgages may not work that way. The loan usually comes due when you move out, sell or pass away, and it can come due sooner if you stop living there or fall behind on property taxes, homeowners insurance or upkeep. If the loan comes due this way and is not repaid, the home can be lost to foreclosure.
A home equity investment, or HEI, pays you a lump sum today in exchange for a share of your home's future value. Providers market it as an investment in your home rather than a loan, but the CFPB points out that it is secured by your home and can cost more than borrowing. There is no age requirement, and you make no monthly payment. The contract is settled in one lump sum when you sell, refinance, reach the end of its term, or hit another triggering event.
The catch is that the cost depends on what your home does. Fees come out of the payment you receive, and the provider's share can come to more than the cash you got, even if the home does not rise in value. Where prices climb sharply, California's regulator warns that the total cost can far exceed a traditional mortgage. The provider also places a lien on your home, which can make a later loan or refinance harder. And if you cannot pay the settlement when it comes due, the CFPB notes that you may have to sell the home.
| Feature | Reverse mortgage | Home equity investment (HEI) |
|---|---|---|
| Monthly payment | None on the loan; taxes, insurance and upkeep still due | None |
| Age requirement | 62 and older | None |
| How the cost grows | Interest added to the balance each month | Provider's share of the home's future value |
| How it ends | Usually when you move out, sell or pass away | Sale, refinance, end of the term or the owner's death, in one lump sum |
| Required counseling | Yes, HUD-approved | No |
A reverse mortgage tends to fit an owner 62 or older who plans to stay in the home for good and cares more about cash flow than about the size of the estate. There is no settlement date to plan around while you live there.
An HEI tends to fit an owner, often one under 62, who expects to sell or refinance within the contract's term and has a realistic way to pay the settlement. It is a harder fit if you expect your home's value to rise sharply, if the fees and the provider's share would cost more than a loan over the time you expect to stay, or if you have no clear plan for the lump sum at the end.
If neither fits, a HELOC or a fixed second mortgage may, as long as a monthly payment is manageable and you qualify with a lender. The full comparison of the main options and what you give up with an HEI go deeper, and the Fit Finder lines the choices up side by side.
These two products are priced in completely different ways, so they are hard to compare on your own. As an independent broker licensed in California, the job is to lay out what each would cost you over the time you expect to stay, next to the loan options. Sometimes the honest answer is that neither one is right.
A reverse mortgage is a loan for owners 62 and older whose balance grows while they live in the home. A home equity investment pays cash for a share of the home's future value, has no age rule, and is settled in one lump sum at a sale, refinance, the end of its term, or the owner's death; its fees come out of the cash, the provider's share can exceed that cash even if the home does not rise in value, and if you cannot settle it you may have to sell.
Neither is better in general: a reverse mortgage suits an owner 62 or older who plans to stay put, while an HEI can fit a younger owner with a clear way to settle it. An HEI's fees come out of the cash you receive, its cost can exceed that cash even if the home does not rise in value, and if you cannot settle it you may have to sell.
In California, a reverse mortgage borrower must first meet with a HUD-approved housing counselor. An HEI has no such requirement, so reading the contract closely and comparing it with other options falls to you.
This article draws on 8 primary sources, cited inline where each figure appears. We re-check the numbers when incentive amounts, regulations, or product availability change.
Last updated Oct 3, 2026
A second home can be a source of cash, but fewer options work on it than on the home you live in, and the ones that do usually cost more. A reverse mortgage is ruled out entirely.
An HEI, HELOC, second mortgage, reverse mortgage, and cash-out refinance each fit a different situation. A plain comparison on payment, qualification, and rate.
A cash-out refinance and a reverse mortgage both replace your current mortgage and pay you cash. One adds a monthly payment and tests income; the other has no monthly payment and a balance that grows.
Book a no-obligation 15-minute call with JJ. He compares an HEI, HELOC, second mortgage, reverse, and cash-out refinance, then places the one that actually fits your situation.
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