Although inflation has dropped from the decades-high it hit in June 2022, it’s still almost a full percentage point over the Federal Reserve’s target 2% goal. Because of this, and other economic considerations, the federal funds rate is still exponentially higher than it was at the start of the decade. That, in part, has caused borrowing costs to surge. And while they’re a bit better than they were at this point in 2024, interest rates are still relatively high. Credit card rates, for example, hit their highest level ever last fall.

Against this backdrop, some homeowners have elected to borrow from their accumulated home equity instead. And with multiple ways to do so, it can be difficult to determine which is better right now, at the start of 2025. Both home equity lines of credit (HELOCs) and reverse mortgages, for example, have appealing features for borrowers to explore currently. Below, we’ll break down why each may be the better option for 2025.

Start by seeing how much equity you could borrow with a HELOC here.

HELOC vs. reverse mortgage: Which will be better in 2025?

While both of these products offer unique benefits to homeowners, they may not be right for everyone. Here’s why each could be more advantageous this year:

Why a HELOC could be better in 2025

A HELOC will generally be better for more homeowners in 2025 for a simple reason: it doesn’t come with the same age restrictions that a reverse mortgage does. But that’s not the only reason why it could be advantageous for homeowners now. HELOCs come with variable interest rates that will change each month for borrowers. While that’s a risk in an interest rate climate in which rates are on the rise (like they were in 2022 and 2023), it’s a distinct advantage now following a series of interest rate reductions in recent months. 

This means the HELOC you open today will likely become cheaper by the summer. And you won’t need to refinance – or pay refinancing closing costs like you would with a home equity loan – to secure that lower rate. Your HELOC will simply adjust independently, automatically reducing what you have to pay back to your lender each month. And considering that HELOC rates just hit an 18-month low, now could be a smart time to start shopping for lenders.

Get started with a HELOC here.

Why a reverse mortgage could be better in 2025

You’ll need to be 62 or older to qualify for a reverse mortgage (with some rare exceptions) but, if you meet the age requirements, this could be the preferable way to borrow home equity, particularly when compared to a HELOC. With a reverse mortgage, you won’t need to worry about rate changes and, subsequently, your upcoming payments. 

That’s because a reverse mortgage operates exactly as its name indicates – instead of making payments to a lender each month, the lender will send payments directly to you from your accumulated equity. This money will only need to be repaid in the event of death or if you sell the home. So if you want to borrow from your home equity but don’t want to be concerned about repayments, interest rates and changes to the wider rate climate, a reverse mortgage could be preferable this year (again, assuming you meet the age criteria).

Learn more about your reverse mortgage options here.

The bottom line

Both HELOCs and reverse mortgages have unique features homeowners may want to explore this year. By researching both options carefully and measuring them against one another as well as other alternatives like home equity loans and cash-out refinances, owners can better determine which offers the optimal way to borrow from their home equity now. Because the home is on the line in any of these borrowing exchanges, however, it makes sense to thoroughly consider all options before getting started.