Types of Reverse Mortgages

Three Types at a Glance

Not all reverse mortgages are the same. Depending on the value of your home, how you plan to use the funds, and what protections matter most to you, one type may be a better fit than the others. Here is a side-by-side comparison before we dive into the details of each.

1. HECM (Home Equity Conversion Mortgage)

The Home Equity Conversion Mortgage is the most widely used reverse mortgage in the United States. It is the only reverse mortgage insured by the federal government, through the Federal Housing Administration (FHA), and it accounts for the vast majority of all reverse mortgages originated each year.

How It Works

A HECM allows homeowners age 62 and older to convert a portion of their home equity into cash. You can receive the money as a lump sum, monthly payments, a line of credit, or a combination. No monthly mortgage payments are required, and the loan is repaid when you sell the home, move out permanently, or pass away.

Key Features and Requirements

• FHA insurance: The loan is backed by the FHA, which protects both the borrower and the lender. If the loan balance ever exceeds the home's value, FHA insurance covers the difference — meaning you and your heirs will never owe more than the home is worth.
• Lending limit: The FHA sets a maximum claim amount. For 2025, this cap is $1,209,750. If your home is worth more than this, the loan calculation is based on the cap rather than the full value.
• Mandatory counseling: You must complete a counseling session with a HUD-approved agency before applying.
• Financial assessment: Lenders evaluate your ability to pay property taxes, insurance, and maintenance costs.
• Mortgage insurance premiums (MIP): HECM borrowers pay an initial MIP at closing (2% of the home's appraised value or the FHA lending limit, whichever is less) plus an annual MIP of 0.5% of the outstanding loan balance.
• Payout flexibility: You can choose from all available disbursement options, including the growing line of credit feature.

Who It Is Best For

The HECM is the best option for most borrowers. Its federal insurance, mandatory counseling, non-recourse protection, and flexible payout options make it the most consumer-friendly reverse mortgage available. If your home value falls within the FHA lending limit and you are at least 62, this is typically the recommended starting point.

2. Proprietary (Jumbo) Reverse Mortgages

Proprietary reverse mortgages — sometimes called "jumbo" reverse mortgages — are private loans offered by individual lenders. They are not insured by the FHA and are not part of the HECM program.

How They Differ From HECMs

The primary reason proprietary reverse mortgages exist is to serve homeowners whose properties are worth more than the FHA lending limit. Because they are not bound by federal caps, these loans can provide access to a larger share of equity for high-value homes.

However, because they are not federally insured, proprietary reverse mortgages do not carry all of the same protections as HECMs. The specific terms, features, and costs vary from lender to lender because there is no standardized federal framework governing them.

Key Features

• Higher lending limits: Many proprietary programs accept home values of $4 million or more, allowing borrowers to access significantly more equity than a HECM would provide.
• Lower minimum age: Some proprietary programs allow borrowers as young as 55 or 60, compared to the HECM requirement of 62.
• No FHA mortgage insurance premium: Because the loan is not FHA-insured, there is no upfront or annual MIP. This can reduce overall costs, though interest rates and other fees may be higher to compensate.
• Counseling may not be required: While some lenders recommend or require counseling, it is not mandated by federal law for non-HECM products.
• Non-recourse protection varies: Many proprietary programs do include non-recourse provisions, but this is not guaranteed. It is essential to confirm this with the lender before signing.
• More limited payout options: Not all proprietary programs offer the full range of disbursement choices. Some may only offer a lump sum or a line of credit.

Who It Is Best For

Proprietary reverse mortgages are designed for homeowners with high-value properties — typically worth $1 million or more — who need to access more equity than a HECM would allow. They may also be appropriate for homeowners between the ages of 55 and 61 who do not yet qualify for a HECM. Because these products lack the standardized federal protections of a HECM, it is especially important to review the terms carefully and, ideally, consult with a financial advisor before proceeding.

3. Single-Purpose Reverse Mortgages

Single-purpose reverse mortgages are the least common type. They are offered by some state and local government agencies and nonprofit organizations, and they are designed to help seniors with a specific, limited financial need.

How They Work

As the name suggests, these loans can only be used for one specific purpose approved by the lender. The most common approved uses are:

• Home repairs or modifications: Fixing a roof, upgrading accessibility features, or making other necessary improvements.
• Property tax payments: Covering overdue or upcoming property tax bills to prevent tax liens or foreclosure.

You cannot use the money for general living expenses, medical bills, vacations, or any purpose outside the one specified in the loan agreement.

Key Features

• Very low cost: Single-purpose reverse mortgages typically have the lowest costs of any reverse mortgage type. Origination fees, closing costs, and interest rates are often significantly lower than HECMs or proprietary products. Some programs charge no origination fees at all.
• Limited availability: These programs are not available everywhere. They depend on funding from state or local governments and nonprofits, so availability varies greatly by location.
• Smaller loan amounts: Because the funds are restricted to a specific use, the loan amounts tend to be much smaller than what you would receive from a HECM or proprietary reverse mortgage.
• Income restrictions: Many single-purpose programs are designed for low-to-moderate income seniors and have income or asset limits for eligibility.
• Simpler process: The application process is generally simpler and faster than for a HECM, with less paperwork and fewer requirements.

Who It Is Best For

Single-purpose reverse mortgages are best for seniors with a specific, immediate need — such as urgent home repairs or catching up on property taxes — who do not need a large amount of money and want to keep costs as low as possible. They are particularly well-suited for lower-income homeowners who may not qualify for or need the larger amounts available through a HECM or proprietary product.

Which Type Should You Choose?

The right type of reverse mortgage depends on your specific situation. Here are some general guidelines:

• If your home is worth less than the FHA lending limit and you are 62 or older, start with a HECM. Its federal protections, flexible payout options, and widespread availability make it the standard choice for most borrowers.
• If your home is worth significantly more than the FHA limit, a proprietary reverse mortgage may allow you to access more of your equity. Compare the terms and protections carefully against what a HECM would offer.
• If you have a specific, limited need — like paying for home repairs or catching up on property taxes — check whether your state or local government offers a single-purpose reverse mortgage. The lower costs can make it a smart choice for smaller amounts.
• If you are between 55 and 61, your only option is a proprietary product, since HECMs require the borrower to be at least 62.

Regardless of which type you are considering, speaking with a HUD-approved housing counselor is a wise first step. Even if counseling is not required for the product you are exploring, a counselor can help you compare your options and understand the full picture before making a decision.