While most reverse mortgages are Home Equity Conversion Mortgages, or “HECM” loans, there are several reverse mortgage loan types to be aware of if you are in the market to tap into your home equity.

In this article, you will learn:

  • What differentiates the 3 different types of reverse mortgages
  • Key elements that each type offers
  • Resources and where to learn more

In addition to HECM loans, there are proprietary or “jumbo” reverse mortgages and single-use reverse mortgages.  Proprietary loans have recently gained popularity, particularly in areas with high home values.

On the other hand, single-use loans were more popular historically and may be more challenging to find in today’s market.

ARLO displays 3 types of reverse mortgages

What are the 3 types of reverse mortgages?

1.  Home Equity Conversion Mortgages

HECM loans are by far the most popular type of reverse mortgage, accounting for the majority of reverse mortgages originated today.  Because HUD insures the HECM under the Federal Housing Administration (FHA), the loan offers several compelling features, including a guaranteed line of credit, payment plans, and lifetime non-recourse protection.

2.  Proprietary, or “Jumbo” Reverse Mortgages

Proprietary and Jumbo reverse mortgages are typically available to homeowners with homes valued above the HECM lending limit of $1,149,825.  Private reverse mortgages are not subject to HECM program rules.  While they function much like HECMs, they may carry different terms, such as borrower age requirements and eligible property types. 

3.  Single-Purpose Reverse Mortgages

These loans are less common than the other types, and non-profits or government agencies typically offer them to allow borrowers to get a reverse mortgage with a single purpose.  The specified purpose might be making home modifications or allowing the borrower to pay property taxes.  Often, single-use reverse mortgages have an income requirement, and those meeting a low-income threshold can qualify, depending on the program. 

Differentiating Reverse Mortgage Types

HECM loans, as the most common reverse mortgage type, are insured by the Federal Housing Administration under a program administered by the Department of Housing and Urban Development.  Every HECM borrower is required to pay an insurance premium

As part of the insurance program, borrowers are entitled to several protections: 

– The borrower will never owe more to repay the loan than the home is worth at the time of sale

– The borrower will continue to receive loan payments as agreed upon under the terms of the loans, even if the lender should go out of business

Many HUD-approved lenders offer HECM loans.  Proprietary loans, in contrast, are typically offered by a single lender or a group of lenders.  While they generally work the same way as HECM loans, their proprietary nature allows them to offer terms different from HECM loans. 

For example, many proprietary reverse mortgages allow borrowers to access home equity amounts well over the federal lending limit.  Some also allow borrowers to qualify before reaching the minimum HECM age of 62, which is 55

A government agency generally offers single-use reverse mortgages for a particular purpose. 

Key Elements

All reverse mortgages allow borrowers to access their home equity.  At the same time, they still live in the home — a key benefit for many retirees with substantial home equity but do not wish to sell their home. 

The different types of reverse mortgages also offer some distinct elements.  HECM loans, for example, carry government protections under the FHA insurance program.  They also require that all borrowers complete reverse mortgage counseling before completing a reverse mortgage application. 

In contrast, Proprietary loans allow borrowers to access additional home equity relative to the HECM program.

Single-purpose reverse mortgages are much more challenging and can offer specific benefits depending on the program.  Some government programs offer property tax assistance or forgiveness as an alternative to tapping home equity to pay property taxes and avoid foreclosure. 

Reverse Mortgage Comparison: HECM, Proprietary, and Single-Purpose Options

FeaturesHECMProprietarySingle-Purpose
Government-InsuredYesNoNo
Loan Limits$1,149,825$4,000,000Low, intended for specific purposes
Age Requirement62 years or older55Varies, often 62 years or older
Property TypeSingle-family homes, FHA-approved condominiumsMay include a broader range of property typesTypically restricted to primary residence
Use of FundsNo restrictionsNo restrictionsSpecific purpose (e.g., home repairs)
Counseling RequirementMandatory HUD-approved counselingMandatory HUD-approved counselingMay be required
Mortgage Insurance PremiumRequiredNot requiredNot applicable
This table provides a comparison of 3 types of common reverse mortgages: HECM, proprietary, and single-purpose reverse mortgages across various features, such as whether they are government-insured, their loan limits, age requirements, property type eligibility, usage of funds, counseling requirements, and mortgage insurance premiums.

Frequently Asked Questions about Reverse Mortgage Types

Q.

What is the most common type of reverse mortgage in 2024?

The most common type of reverse mortgage in 2024 is the HECM (Home Equity Conversion Mortgage).  The federal government insures this reverse mortgage program through HUD/FHA.
Q.

What type of reverse mortgage has the lowest cost?

The type of reverse mortgage with the lowest costs currently known is the Proprietary (Jumbo) reverse mortgage program.  HUD does not insure these programs and has no mortgage insurance premiums.
Q.

What is the most commonly used reverse mortgage?

The HECM (Home Equity Conversion Mortgage) is the most commonly used reverse mortgage.  Moreover, the line of credit option is the most commonly used HECM loan due to the loan’s line of credit growth feature.
Q.

What is the difference between HECM and reverse mortgages?

The difference between a HECM and a reverse mortgage is that a HECM (Home Equity Conversion Mortgage) is a specific type of reverse mortgage loan.  A reverse mortgage is a loan encompassing the HECM and proprietary loan programs.
Q.

What lenders offer proprietary reverse mortgages?

Many different lenders offer proprietary reverse mortgages in one capacity or another.  All Reverse Mortgage, Inc. does offer proprietary reverse mortgages.

Were to Learn More

For more information about the HECM program, HUD maintains online resources, including program rules, reverse mortgage counseling agencies, and a HUD-approved lender list.  Prospective borrowers can work directly with a reverse mortgage lender like All Reverse Mortgage to learn about proprietary and jumbo reverse mortgages. 

For single-purpose reverse mortgages and other programs available to homeowners in specific cities and states, homeowners can contact their local housing agency. 

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