This article introduces a recent inquiry received in Columbus. The individual was curious about whether to borrow against their home equity through a home equity loan or to receive funds via a reverse mortgage, given that they had insufficient retirement funds but significant equity in their home. Although both options involve the same equity, they differ in their repayment structures. This article will explore how these two choices differ based on Columbus and will focus on the structure of reverse mortgages.

A home equity loan is a standard loan where you borrow a lump sum against your equity and repay it monthly with principal and interest. In contrast, a reverse mortgage allows homeowners aged 62 and older to receive funds from a lender using their equity as collateral, without the need for monthly repayments. Funds can be received as a lump sum, monthly payments, or a line of credit, and the principal and interest are settled when the home is sold, the owner passes away, or the home is no longer used as the primary residence. The Home Equity Conversion Mortgage (HECM), which is backed by the Federal Housing Administration, is the primary product and the only type of reverse mortgage guaranteed by the federal government.

According to Zillow data, as of May 31, 2026, the average home value in Columbus is $251,236, which has decreased by 0.7 percent over the past year. With a home equity loan, you would borrow a lump sum against this equity but would incur monthly repayment obligations. In a situation where fixed income decreases after retirement, this repayment burden could put pressure on living expenses. The absence of repayment obligations with a reverse mortgage creates a significant difference in cash flow, even with the same budget.

However, the cost structure for reverse mortgages is heavier. Initial costs are higher than a standard home equity loan due to origination fees, an initial mortgage insurance premium of about 2 percent, an annual insurance premium of approximately 0.5 percent, and closing costs. The eligibility requirements also differ. Reverse mortgages require the borrower to be at least 62 years old, to meet primary residence requirements, to be able to repay any existing mortgage balance, and to pass a financial assessment verifying the ability to pay property taxes and insurance. Home equity loans do not have an age limit but have stricter income and credit score requirements.

Property tax obligations apply to both products. In Franklin County, the effective tax rate for the Columbus area is about 1.48 percent. Whether you choose a reverse mortgage or a home equity loan, you must continue to pay property taxes and insurance, and failing to do so can lead to default risk. Especially for families moving to Columbus from other states, it is safer to recalculate based on the Franklin County effective tax rate rather than directly comparing it to the property tax system of their previous residence. Even with the same budget, tax rates can vary by school district, so it is essential to verify the exact tax rate for the specific address before purchasing or applying.

In terms of advantages, reverse mortgages are structured as non-recourse loans, meaning that if the home value falls below the loan balance, heirs are not required to pay the excess due to FHA insurance. However, the downside is that the equity decreases over time, which is a feature not present with home equity loans, potentially reducing the assets left for children. With a home equity loan, as long as you continue to make payments, you can maintain or increase your equity, but this comes with the prerequisite of being able to handle the monthly repayment burden.

In Ohio, individuals aged 65 and older make up 19.1 percent of the population, which is higher than the national average, and inquiries about these comparisons in Columbus are expected to continue to rise. The right choice depends on monthly repayment capacity, inheritance plans, and how many more years you plan to stay in the home. HECM applications require mandatory counseling from a HUD-approved agency, where comparisons with home equity loans can also be discussed. This is not investment or legal advice, and tax and loan conditions can vary significantly based on county and individual financial situations, so it is essential to consult with HUD and discuss with family before making any final decisions.