If you’re exploring ways to use your home’s equity to improve your financial security in retirement, it’s helpful to know that there are three main types of reverse mortgages—each designed for different needs.

In this article, we’ll explain:

• Home Equity Conversion Mortgages (HECM): The most popular, federally insured option.
• Proprietary Reverse Mortgages: Also called “jumbo” reverse mortgages, ideal for higher-value homes.
• Single-Purpose Reverse Mortgages: A cost-effective choice for specific financial goals.

We’ll break down the key features of each, highlight how they can support your financial needs, and guide you toward resources to make an informed decision.

Three Types of Reverse Mortgages: An Overview

When considering a reverse mortgage, it’s essential to understand the three main types available. Each serves different needs and offers unique advantages:

• Home Equity Conversion Mortgages (HECM):
  These federally insured loans are the most popular choice for homeowners aged 62 and older.  HECM loans provide flexibility and can be used for a variety of needs, from covering daily expenses to funding large projects.
• Proprietary Reverse Mortgages:
  Often called “jumbo” reverse mortgages, these are designed for homes with higher values. They are not federally insured but can provide larger loan amounts, making them popular in areas with expensive real estate.
• Single-Purpose Reverse Mortgages:
  These are less common but may be a cost-effective option if you need help covering specific expenses, such as home repairs or property taxes.  While availability is limited, they can be a practical solution for targeted needs.

Understanding these types can help you decide which option best aligns with your financial goals and circumstances.

1. Home Equity Conversion Mortgages (HECM)

Home Equity Conversion Mortgages (HECM) are the most popular type of reverse mortgage, accounting for the majority of loans in the market.  These loans are insured by the U.S. Department of Housing and Urban Development (HUD) under the Federal Housing Administration (FHA), offering homeowners valuable peace of mind.

Key benefits of HECM loans include:

• Flexible Payout Options: Borrowers can choose a lump sum, monthly payments, or a line of credit to meet their financial needs.
• Lifetime Non-Recourse Protection: You’ll never owe more than your home’s value when it’s sold, no matter how long you live or market conditions.
• Versatility: Funds can be used for virtually anything, from covering daily expenses to paying off an existing mortgage or funding in-home care.

With its flexibility and protections, the HECM is a reliable choice for those seeking financial security in retirement.

2. Proprietary or “Jumbo” Reverse Mortgages

Proprietary reverse mortgages, often called “jumbo” loans, are designed for homeowners with properties valued above the federal limit of $1,209,750.  Unlike HECM loans, these private loans are not federally insured, which allows for greater flexibility in some cases.

Key features of proprietary reverse mortgages include:

• Higher Loan Limits: Ideal for high-value homes, these loans often provide significantly larger payouts than HECM loans.
• Flexible Eligibility: Some lenders allow younger homeowners (under age 62) to qualify and may accept a wider range of property types, including high-value condominiums.
• Lower Closing Costs: Because these loans don’t require upfront mortgage insurance premiums, borrowers can save thousands—up to $24,195 in some cases.

Proprietary reverse mortgages are particularly popular in areas with expensive real estate.  They offer a practical solution for homeowners looking to access more of their equity without the additional costs associated with HECM loans.

3. Single-Purpose Reverse Mortgages

Single-purpose reverse mortgages are a unique type of loan offered by non-profit organizations and government agencies. Unlike other reverse mortgages, these loans are intended for a specific use, as determined by the lender.

Examples of eligible uses include:

• Home Modifications: Making your home more accessible or safe, such as installing ramps or railings.
• Property Taxes: Covering overdue property taxes to help you avoid financial penalties or liens.

These loans are typically aimed at lower-income homeowners.  Eligibility often depends on meeting specific income requirements set by the organization or agency offering the program.

While less common than other reverse mortgage types, single-purpose loans can be a cost-effective solution for homeowners needing targeted financial assistance.

Which Reverse Mortgage Is Right for You?

Choosing the right reverse mortgage depends on your financial goals, home value, and eligibility. Here’s a quick comparison of the three main types to help you decide:

Key Questions to Consider:

• Do you want flexible loan terms and federal protections? A HECM might be the best choice.
• Do you own a high-value home or need more equity than HECM limits? Explore a proprietary reverse mortgage.
• Do you need help with a specific expense? A single-purpose reverse mortgage could fit your needs.

By understanding these distinctions, you can make an informed choice that aligns with your financial goals.

Exploring Reverse Mortgage Options: Resources and Contacts

For more information about the HECM program, HUD maintains online resources, including program rules, reverse mortgage counseling agencies, and a list of HUD-approved lenders. 

Prospective borrowers can learn about proprietary and jumbo reverse mortgages directly with a reverse mortgage lender like All Reverse Mortgage. 

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

Exploring Reverse Mortgage Options: Resources and Contacts

When it comes to choosing the right reverse mortgage, having reliable resources is essential. Here’s where you can find helpful information:

• For HECM Loans:
  The Department of Housing and Urban Development (HUD) provides a wealth of online resources, including program rules, reverse mortgage counseling agencies, and a directory of HUD-approved lenders. Visit HUD.gov or call 800-CALL-FHA for personalized assistance.
• For Proprietary and Jumbo Reverse Mortgages:
  Proprietary reverse mortgages are offered directly by private lenders. To explore these options, contact a trusted provider like All Reverse Mortgage, Inc. for personalized quotes and guidance tailored to your home’s value and financial goals.
• For Single-Purpose Reverse Mortgages:
  These loans are offered through local housing agencies or non-profits. Contact your local housing authority to inquire about availability and eligibility requirements in your area.

Taking advantage of these resources can help you make informed decisions and find the reverse mortgage option that best fits your needs.

Top FAQs

Also See: 

• HECM VS REVERSE MORTGAGE: IS THERE A DIFFERENCE?