Most homeowners over 62 have at least heard of a reverse mortgage. Far fewer have heard of a Home Equity Investment (HEI) — and almost nobody has a side-by-side way to compare the two with the same inputs. That gap matters, because these products solve a similar problem (turning home equity into cash) through completely different mechanics. One is a loan with accruing interest; the other is a contract tied to your home's future value. This guide explains both, shows where they diverge, and points you to a free calculator that models the crossover point where one becomes more expensive than the other.
What Is a Reverse Mortgage?
A Home Equity Conversion Mortgage (HECM) is the most common type of reverse mortgage — a federally insured loan for homeowners aged 62 or older that converts home equity into cash. You can receive funds as a lump sum, fixed monthly payments, or a line of credit (or a combination). Unlike a forward mortgage, you generally do not make monthly mortgage payments; instead, the loan balance grows over time as interest and fees accrue.
The loan is repaid when you sell the home, move out permanently, or pass away. HECM reverse mortgages include non-recourse protection: you or your heirs never owe more than the home is worth at settlement, even if the loan balance exceeds the property value. As of 2026, the FHA HECM lending limit is $1,249,125 — amounts above that cap may require a proprietary (non-FHA) product. [VERIFY]
- Minimum age 62 for HECM (some proprietary products allow 55+ in select states)
- Must be your primary residence
- HUD-approved counseling required before closing — not optional
- Loan balance grows; home equity shrinks over time
- Non-recourse: repayment capped at home value at settlement
What Is a Home Equity Investment (HEI)?
A home equity investment is not a loan. You receive a lump sum of cash today, and in exchange the HEI provider receives a contractual right to a percentage of your home's future value — often framed as an appreciation share or total value share depending on the agreement. There are no monthly payments and no interest charges. You settle when the home is sold, you refinance, or the contract term ends (typically 10 to 30 years).
Because repayment is tied to home value, HEI cost rises in a strong housing market. A home that appreciates from $500,000 to $800,000 over ten years produces a much larger settlement to the provider than one that grows modestly. HEIs are less regulated than HECMs — terms vary widely among providers such as Hometap, Point, Unison, and Splitero. This is not an endorsement of any provider; always review your specific contract.
- No minimum age — available to homeowners under 62
- No monthly payments; no interest accrual
- Cost tied to home appreciation, not time
- Typically requires roughly 20–25% equity and credit scores as low as ~500 [VERIFY]
- Less standardized regulatory oversight than HECMs
The Key Difference Most People Miss
Reverse mortgage cost is primarily tied to time — interest compounds on the loan balance whether your home goes up or down in value. HEI cost is primarily tied to appreciation — the more your home grows, the larger the provider's share at settlement. That creates a crossover: at low appreciation rates, an HEI can cost less over a given period; at higher appreciation rates, the reverse mortgage often wins because you are not giving up a growing slice of equity.
Key Takeaway
Imagine a $500,000 home today with a 10-year horizon. At 3% annual appreciation, the home might reach roughly the mid-$600,000s — a moderate HEI settlement. At 6% appreciation, the same home could approach $900,000, and an HEI provider's percentage share becomes dramatically more expensive. A reverse mortgage balance, meanwhile, grows on a predictable interest curve regardless of appreciation.
Neither product is universally "better." The right answer depends on how long you stay, how much you draw, what rate or share you are offered, and what you expect home prices to do in your market. That is exactly why a side-by-side model matters — generic advice cannot tell you which costs less at your numbers.
Tax treatment differs as well. Reverse mortgage loan advances are generally not taxable income because they are borrowed funds — but interest is not deductible until the loan is repaid in many cases. HEI proceeds may also be treated differently depending on structure; consult a tax professional before proceeding with either product. [VERIFY]
Side-by-Side Comparison
| Feature | Reverse mortgage (HECM) | Home equity investment (HEI) |
|---|---|---|
| Age requirement | 62+ (HECM); 55+ proprietary in some states | No minimum age |
| Payout structure | Lump sum, line of credit, or monthly payments | Typically one-time lump sum |
| Monthly payments required? | No (taxes/insurance still due) | No |
| How cost is calculated | Accruing interest + fees on loan balance | Percentage of future home value |
| Regulatory oversight | FHA-insured HECM; HUD counseling required | Less standardized; varies by provider |
| Non-recourse protection | Yes — never owe more than home value | No — settlement based on contract terms |
| Time limit | No fixed term while you live in home | Contract term (often 10–30 years) |
Use Our Free Calculator to Compare Your Specific Numbers
Most reverse mortgage calculators online model loan proceeds and interest accrual — but stop there. They do not put an HEI offer beside a HECM scenario with the same home value, time horizon, and appreciation assumption. Our Reverse Mortgage vs. HEI Calculator does exactly that: enter both sets of terms, adjust projected appreciation, and see the crossover point where one option's effective cost exceeds the other.
If you have an actual HEI offer in hand, plug in the provider's investment amount and appreciation share. If you are still researching reverse mortgages, use illustrative rate and upfront cost defaults — then refine with lender quotes. The chart shows effective cost from 0% to 10% appreciation so you can stress-test both bull and bear housing scenarios.
Compare reverse mortgage vs. HEI — adjust appreciation to see the crossover
Important — read before using this calculator
This calculator provides estimates only. Actual reverse mortgage loan amounts, interest rates, fees, and terms vary significantly by lender, your age, home value, and credit profile. HECM reverse mortgages require HUD counseling before closing.
Home Equity Investment terms vary by provider (Unison, Point, Hometap, Splitero, etc.). The appreciation share percentage and other terms depend on your specific agreement — enter the figures from any actual offer you've received for the most accurate comparison.
This is not financial advice. Consult a HUD-approved counselor and a licensed financial advisor before making decisions about accessing your home equity.
Not financial advice. For informational purposes only. HECM requires age 62+; proprietary reverse mortgages may allow age 55+ in some states.
Your situation
HECM requires 62+; some proprietary products allow 55+
Key variable — higher appreciation makes HEI costlier
Reverse mortgage
Est. principal limit factor: 57% of home value (approx.; varies by age and rates — not a lender quote). Max available proceeds: $106,500.
Illustrative rate — actual rates vary by lender.
Capped at estimated max available ($106,500)
Home equity investment (HEI)
Enter the lump sum from your HEI offer
Typical range 15–40%
Most HEI contracts are 10–30 years
Crossover insight
At 7.5% annual appreciation, both options have roughly the same effective cost over 10 years. At your 3.0% rate, the reverse mortgage costs more than the HEI.
Side-by-side comparison
After 10 years at 3.0% annual appreciation
| Reverse Mortgage | Home Equity Investment | |
|---|---|---|
| Cash received today | $100,000 | $100,000 |
| Estimated home value at end of term | $604,762 | $604,762 |
| Amount owed at end of term | $231,111 (loan + interest) | $151,191 (25% of home value) |
| Remaining equity to you/heirs | $373,651 | $453,572 |
| Effective total cost | $131,111 | $51,191 |
Lower cost option
HEI
For other ways to tap equity, explore our HELOC calculator for revolving credit or the home equity loan calculator for fixed-rate second mortgages. Read what an HEI actually costs for a worked example, and when a reverse mortgage makes sense for situational guidance.
Key Takeaway
This is general educational information only — not financial advice. Consult a HUD-approved counselor and a licensed financial advisor before accessing home equity.