Reverse Mortgage vs. Home Equity Loan: What South Dakota Homeowners 62+ Need to Know
By Jeff Buum, Certified Reverse Mortgage Specialist (CRMS) | Fairway Heartland | Sioux Falls, SD | NMLS #400290
jeffbuummortgage.com · 8 min read · Reverse Mortgage
If you own a home in South Dakota and you are 62 or older, you have options for accessing the equity you have built. Two of the most common are a reverse mortgage (HECM) and a home equity loan or home equity line of credit (HELOC). Both let you borrow against your home, but they work very differently, and for most South Dakotans in or near retirement, the differences matter a great deal.
This article compares the two side by side, in plain language, so homeowners can make an informed decision about which tool, if either, is right for their situation. According to Jeff Buum, a Certified Reverse Mortgage Specialist at Fairway Heartland, the single biggest difference comes down to one thing: monthly payments.
The Fundamental Difference
The core difference between a reverse mortgage and a home equity loan is the monthly payment. A home equity loan or HELOC requires monthly payments immediately after closing. You borrow against your equity and begin repaying the balance right away, with interest. If you stop making payments, you risk losing your home.
A reverse mortgage requires no monthly principal or interest payment for as long as you live in the home as your primary residence. The loan balance grows over time, and repayment is deferred until you sell, permanently move out, or pass away. For South Dakotans on a fixed retirement income, that difference is often the deciding factor.
Side-by-Side Comparison
| Feature | Home Equity Loan / HELOC | Reverse Mortgage (HECM) |
|---|---|---|
| Monthly payment required | Yes — required immediately after closing, typically for 10–30 years. | No — no monthly principal or interest payment while you live in the home. |
| Age requirement | None — any qualified homeowner can apply. | At least one borrower must be 62 or older. |
| Income & credit qualification | Standard underwriting — income, credit score, and debt-to-income all evaluated. | Financial assessment only — no minimum credit score or income requirement. |
| If you can't pay | Default risk — missed payments can lead to foreclosure. | No payment to miss. Default risk applies only to taxes, insurance, and maintenance. |
| Loan balance over time | Decreases as you make payments. | Grows over time as interest accrues and no payments are made. |
| Non-recourse protection | No — you or your heirs are responsible for the full balance. | Yes — you and your heirs never owe more than the home's value at sale. |
| HUD / FHA oversight | No federal program oversight. | Fully regulated by HUD and insured by FHA. |
| Independent counseling required | No. | Yes — mandatory HUD-approved counseling before closing. |
When a Home Equity Loan or HELOC Makes More Sense
A home equity loan or HELOC may be the better choice when:
You are under 62 and therefore don't qualify for a reverse mortgage.
You have strong, reliable income in retirement and can comfortably make monthly payments without straining your budget.
You need a relatively small amount of money for a short period and plan to repay it quickly.
You want to preserve as much equity as possible for your heirs and are comfortable with the payment obligation.
When a Reverse Mortgage Makes More Sense
A reverse mortgage is likely the stronger option when:
You are 62 or older and want to access equity without adding a monthly obligation to a fixed retirement income.
You want to eliminate an existing mortgage payment rather than add a new one.
Your retirement income makes qualifying for a home equity loan difficult or unlikely.
You want the non-recourse protection that ensures your heirs are never personally liable for more than the home is worth.
You want to use a growing line of credit as a retirement income planning tool rather than a one-time draw.
What About a Cash-Out Refinance?
A third option some South Dakotans consider is a cash-out refinance, replacing an existing mortgage with a larger one and taking the difference in cash. Like a home equity loan, this requires monthly payments. For retired or near-retired homeowners, adding or extending a monthly mortgage payment is often counterproductive. A cash-out refinance tends to make more sense for homeowners who are still earning income and can comfortably support a larger payment.
The Bottom Line for South Dakotans 62 and Older
If you need access to your home equity and you are 62 or older, a reverse mortgage deserves serious consideration simply because it is the only option that does not require a monthly payment. Whether it is the right choice depends on your specific situation, your income, your goals, your health, your estate planning intentions, and how long you plan to stay in your home. The best way to make this comparison is to have someone model both options side by side using your real numbers, which is exactly what Jeff Buum does in a no-cost consultation.
Frequently Asked Questions
Which is cheaper, a reverse mortgage or a home equity loan?
It depends on your situation. A HELOC may have lower upfront costs, but it requires monthly payments and can be frozen or reduced by the lender. A reverse mortgage has higher upfront costs but no required monthly payment. The right comparison uses your actual numbers.
Can I lose my home with a reverse mortgage?
As long as you live in the home as your primary residence and keep up with property taxes, insurance, and maintenance, you cannot be forced to leave. There is no monthly payment to miss.
Do I need good credit for a reverse mortgage?
There is no minimum credit score. A HECM uses a financial assessment to confirm you can sustain property taxes, insurance, and upkeep, rather than traditional income-and-credit underwriting.
Let's compare your options side by side — with your actual numbers.
Jeff Buum · (605) 321-7303 · jeff.buum@fairwaymc.com · jeffbuummortgage.com/reverse-mortgage
Copyright©2026 Fairway Independent Mortgage Corporation (“Fairway”) NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency. Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUD-approved agency. The youngest borrower must be at least 62 years old. Monthly reverse mortgage advances may affect eligibility for some other programs. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.
