HEI vs Reverse Mortgage: Which Is Right for You in 2026?

HEI vs Reverse Mortgage: The Key Differences

Both products let you access home equity without monthly payments, but the mechanics are fundamentally different:

A Home Equity Investment (HEI) is an equity-sharing arrangement. An investor gives you cash in exchange for a percentage of your home’s future appreciation. No age requirement, no monthly payments, and you settle by sharing appreciation when you sell or refinance.

A Reverse Mortgage (specifically a Home Equity Conversion Mortgage, or HECM) is a government-insured loan. You borrow against your equity, but instead of making payments, the loan balance grows over time as interest accrues. Available only to homeowners age 62+, it settles when you move out, sell, or pass away.

The critical distinction: with an HEI, you’re sharing future gains. With a reverse mortgage, you’re accumulating debt with compounding interest. Both can work well in the right situation, but they serve different needs.

How HEIs Work (Quick Recap)

An HEI provider gives you a lump sum (typically $25,000-$500,000) in exchange for a percentage (15-50%) of your home’s future appreciation. You continue living in and maintaining your home normally. When you sell, refinance, or reach the end of the agreement term (typically 10-30 years), you settle by paying the investor their share of any appreciation.

Key features: No age requirement (any homeowner can apply), no monthly payments, credit scores as low as 500 accepted, and settlement is based on actual home appreciation—if your home doesn’t appreciate, the investor gets less. Companies like Splitero, Hometap, and Point are leading HEI providers.

For a deep dive, read our comprehensive HEI guide.

How Reverse Mortgages Work

A reverse mortgage (HECM) is a federally insured loan available to homeowners aged 62 and older. Instead of making monthly payments to a lender, the lender makes payments to you. The loan balance grows over time as interest and fees accrue on the outstanding balance.

Types of Reverse Mortgages

Lump sum: Receive all funds at once at a fixed interest rate. Best for large, one-time expenses.

Monthly payments: Receive steady monthly income for a set period (term) or as long as you live in the home (tenure). Best for supplementing retirement income.

Line of credit: Draw funds as needed, with unused credit growing over time. Most flexible option and the most popular choice.

Key Requirements

You must be 62 or older, live in the home as your primary residence, have significant equity (generally 50%+), complete HUD-approved counseling, and maintain the property including taxes and insurance. Failure to meet ongoing requirements can trigger loan default.

How Repayment Works

The loan becomes due when you sell the home, move out permanently, or pass away. At that point, the loan balance (original amount + accrued interest + fees) must be repaid, typically from the sale proceeds. If the loan balance exceeds the home’s value, FHA insurance covers the difference—your heirs never owe more than the home is worth (“non-recourse” protection).

Side-by-Side Comparison

Feature	HEI	Reverse Mortgage (HECM)
Age Requirement	None	62+
Monthly Payments	None	None
How You Pay	Share of appreciation at settlement	Loan balance + accrued interest
Credit Required	500+	No minimum (but assessed)
Payout Options	Lump sum only	Lump sum, monthly, or credit line
Government Insured	No	Yes (FHA)
Counseling Required	No	Yes (HUD-approved)
Non-Recourse	Varies by provider	Yes (heirs never owe more than home value)
Settlement Trigger	Sale, refi, or end of term	Sale, move out, or death
Impact on Heirs	Reduced appreciation share	Must repay loan or sell home
Upfront Costs	3-5% of investment	MIP (2%) + origination + closing (4-6% total)
Ongoing Costs	None until settlement	Annual MIP (0.5%) + accruing interest

Cost Analysis: Real Numbers

Let’s compare the total cost of accessing $75,000 from a $500,000 home over different time periods:

Scenario: 10-Year Horizon, 3% Annual Appreciation

HEI: $75,000 cash for 25% appreciation share. Home grows from $500,000 to $671,958 (appreciation: $171,958). Investor receives 25% = $42,990. Your total cost: $42,990.

Reverse Mortgage: $75,000 at 6.5% with 0.5% annual MIP. After 10 years, loan balance grows to approximately $149,000 (interest compounds). Your total cost: $74,000 in accrued interest and fees.

Winner: HEI by $31,010. At moderate appreciation rates and 10-year horizons, HEIs typically cost less because they don’t have compounding interest.

Scenario: 20-Year Horizon, 4% Annual Appreciation

HEI: Home grows to $1,095,562 (appreciation: $595,562). Investor receives 25% = $148,891. Your total cost: $148,891.

Reverse Mortgage: Loan balance after 20 years at 7% effective rate: approximately $290,000. Your cost: $215,000 in accrued interest/fees.

Winner: HEI by $66,109 at 4% appreciation. But at 5%+ appreciation, the HEI cost climbs faster and may exceed the reverse mortgage cost.

The crossover point: In rapidly appreciating markets (5%+/year), reverse mortgages become cheaper because their cost is interest-based, not appreciation-based. In moderate markets (2-4%/year), HEIs typically cost less.

Which Is Right for You?

Choose an HEI if:

You’re under 62 — Reverse mortgages aren’t available to you. HEIs are your best no-monthly-payment option.

You want a shorter commitment — HEI terms of 10-15 years may cost less than a reverse mortgage’s compounding interest over longer periods.

Your market appreciation is moderate — In 2-3%/year appreciation markets, HEIs typically outperform reverse mortgages on total cost.

You want to preserve options — HEIs can be bought out early, giving you more flexibility than a reverse mortgage.

Choose a Reverse Mortgage if:

You’re 62+ and plan to age in place — Reverse mortgages are designed specifically for this. You can stay until death with no payment obligation.

You want monthly income — Reverse mortgages offer tenure payments (monthly income for life in the home). HEIs only provide lump sums.

You want government protections — FHA insurance ensures you never owe more than the home is worth. HEI protections vary by provider.

Your market appreciates rapidly — In 5%+/year markets, reverse mortgage costs are capped by interest rates while HEI costs scale with appreciation.

You want a credit line that grows — The reverse mortgage line of credit increases over time regardless of home value, providing growing access to funds.

Risks and Downsides of Each

The inheritance question: Both products reduce what you leave to heirs. With an HEI, heirs inherit the home minus the appreciation share. With a reverse mortgage, heirs must repay the loan balance (often by selling the home). Neither is great for estate planning, but the reverse mortgage’s non-recourse protection means heirs can never owe more than the home’s value.

The maintenance trap: Reverse mortgages require you to maintain the home, pay property taxes, and keep insurance current. Failure to do so can trigger loan default and potential foreclosure—ironic for a product designed to help retirees stay in their homes. HEIs also require maintenance but enforcement mechanisms vary.

Frequently Asked Questions

Can I get both an HEI and a reverse mortgage?

Generally no. Both products place a claim on your home equity, and most providers won’t allow a subordinate position behind the other. You typically need to choose one or the other.

Which has lower upfront costs?

HEIs typically have lower upfront costs (3-5%) compared to reverse mortgages (4-6% including MIP and origination fees). However, the total cost over time depends heavily on home appreciation and interest rates.

What happens if I outlive my reverse mortgage?

With a tenure payment plan, you receive monthly income as long as you live in the home. The loan balance continues to grow, but you can never owe more than the home’s value (non-recourse protection).

Can my HEI provider force me to sell my home?

Not before the term ends. At term end (typically 10-30 years), you must settle—which may require selling, refinancing, or paying cash. But during the term, you have full control of your home.

Are reverse mortgage proceeds taxable?

No. Reverse mortgage payments are considered loan advances, not income, so they’re not taxable. Similarly, HEI cash is typically not taxable when received (it’s an investment transaction, not income). Consult a tax professional for your specific situation.

Which option leaves more equity for my heirs?

It depends on appreciation rates and time. In moderate-appreciation markets over shorter periods (10-15 years), HEIs typically preserve more equity. Over longer periods (20+ years), the reverse mortgage’s compounding interest can consume more equity than an HEI’s appreciation share. Use our comparison calculator to model your specific scenario.

The Bottom Line

Both HEIs and reverse mortgages solve the same problem—accessing home equity without monthly payments—but for different people in different situations. HEIs offer flexibility and availability to any homeowner; reverse mortgages offer government protections and monthly income options for retirees. The right choice depends on your age, financial needs, local market conditions, and how long you plan to stay in your home. Consult with a financial advisor who understands both products before committing.