A HECM and a reverse mortgage are not two different products. A Home Equity Conversion Mortgage is the FHA-insured version of a reverse mortgage, and it makes up roughly 90 percent of reverse mortgages originated in the United States. Every HECM is a reverse mortgage. The reverse mortgages that are not HECMs are proprietary loans, sometimes called jumbo reverse mortgages, offered by private lenders without federal insurance. So when you compare a HECM against a reverse mortgage, what you are really comparing is the federally backed program against the private alternative.
The practical differences come down to who insures the loan, how much you can borrow, what you pay, and what protections you and your family receive.
The Category and the Two Products Inside It
A reverse mortgage lets a homeowner convert part of their home equity into cash without making monthly mortgage payments. The balance grows as interest and fees accrue, and repayment is deferred until the borrower dies, sells the home, or permanently moves out. That describes the category. Two products live inside it.
The HECM is the only reverse mortgage insured by the federal government, specifically through the Federal Housing Administration.1U.S. Department of Housing and Urban Development. Home Equity Conversion Mortgages for Seniors Congress created the program through the Housing and Community Development Act of 1987, which added Section 255 to the National Housing Act.2U.S. Department of Housing and Urban Development. HUD Handbook 4235.1 REV-1 – Home Equity Conversion Mortgage Program FHA insurance backs every HECM, so the program carries standardized rules, capped costs, and consumer protections that apply no matter which lender originates the loan.
Proprietary reverse mortgages are privately developed products with no FHA insurance. They exist mainly to serve homeowners whose properties are worth well above the HECM lending limit, and loan amounts can reach several million dollars. Because no federal agency insures them, their terms vary from lender to lender, and they are not bound by the same regulatory framework.
Who Can Qualify
Every borrower named on a HECM must be at least 62 years old.3Consumer Financial Protection Bureau. Can Anyone Take Out a Reverse Mortgage Loan? The property must be your principal residence. Eligible property types include single-family homes, two-to-four-unit properties where you occupy one unit, FHA-approved condominiums, and certain manufactured homes that meet HUD standards.1U.S. Department of Housing and Urban Development. Home Equity Conversion Mortgages for Seniors Cooperative units generally do not qualify.
Proprietary reverse mortgages set their own eligibility rules. Some lenders accept borrowers as young as 55, and property-value floors tend to be higher since these products target expensive homes. There is no single set of proprietary qualification standards to line up against the HECM’s uniform requirements.
Counseling and Financial Assessment
Two steps separate the HECM application from a proprietary loan: an independent counseling session and a lender financial assessment. Neither is optional.
Before you can formally apply for a HECM, you must complete a session with a HUD-approved housing counselor who is not affiliated with your lender.4HUD Exchange. HECM Origination Counseling The counselor walks you through the costs, the obligations, and the alternatives. Sessions can be done in person or by phone, and agencies cannot turn you away if you cannot afford to pay.
The lender then performs a financial assessment that reviews your credit history, your record of paying property taxes and homeowners insurance, and whether your income covers ongoing obligations.5U.S. Department of Housing and Urban Development. HECM Financial Assessment and Property Charge Guide If the assessment shows a pattern of late tax payments or thin residual income, the lender must set aside a portion of your loan proceeds in a Life Expectancy Set-Aside (LESA) that automatically pays your property taxes and insurance going forward. The set-aside protects the loan but reduces the cash you can actually use. A fully funded LESA can absorb a large share of your principal limit.
Proprietary reverse mortgages may include their own underwriting review, but no federally mandated counseling, financial assessment, or LESA requirement applies.
What Each One Costs
The FHA insurance is the single biggest cost difference between the two products. HECM borrowers pay a Mortgage Insurance Premium (MIP) with two parts: an upfront premium of 2 percent of the home’s appraised value or the HECM maximum claim amount, whichever is less, and an annual premium of 0.5 percent of the outstanding loan balance, charged monthly. Those premiums fund the FHA insurance pool that guarantees your proceeds and stands behind the non-recourse protection below.
You also pay an origination fee to the lender. HUD caps that fee at $6,000 for most loans, with a floor of $2,500. Third-party closing costs (appraisal, title insurance, recording fees) mirror what you would see on a traditional mortgage closing statement. Many of these costs can be financed into the loan.
Proprietary reverse mortgages skip the MIP entirely, which can save tens of thousands of dollars over the life of the loan. The trade-off is losing the federal insurance backing. Proprietary interest rates also tend to run higher. HECM adjustable rates currently start in the mid-to-upper 5 percent range, while proprietary adjustable rates can run considerably higher. Those rate differences compound over years, so a borrower who qualifies for a HECM should think carefully before choosing a proprietary product just to unlock a larger loan.
How Much You Can Borrow
The amount a HECM makes available is called the principal limit. Three factors set it: the age of the youngest borrower (or eligible non-borrowing spouse), current interest rates, and the lesser of the home’s appraised value or the HECM maximum claim amount.1U.S. Department of Housing and Urban Development. Home Equity Conversion Mortgages for Seniors Older borrowers get a higher percentage of the home’s value. Lower interest rates raise the limit.
For 2026, the HECM maximum claim amount is $1,249,125.6U.S. Department of Housing and Urban Development. Mortgagee Letter 2025-22 – 2026 Home Equity Conversion Mortgage Limits If your home is worth $2 million, the HECM calculation still uses $1,249,125 as the value. That cap is the main reason proprietary products exist. Homeowners with high-value properties can reach loan amounts up to $4 million with some proprietary lenders.
HUD also limits first-year draws on a HECM. You can generally access up to 60 percent of the principal limit during the first 12 months. If mandatory obligations (paying off an existing mortgage, for example) exceed that 60 percent, you can draw enough to cover those obligations plus another 10 percent, though the upfront MIP may be higher.
Non-Recourse Protection
The HECM’s non-recourse guarantee is one of the strongest consumer protections in mortgage lending. You or your heirs will never owe more than the home’s fair market value when the loan comes due, no matter how large the loan balance has grown.2U.S. Department of Housing and Urban Development. HUD Handbook 4235.1 REV-1 – Home Equity Conversion Mortgage Program If interest has been compounding for decades and the loan balance is $600,000 on a home now worth $400,000, neither you nor your estate owes that $200,000 gap. The FHA insurance fund absorbs the shortfall.
Proprietary reverse mortgages typically advertise non-recourse features too, and most legitimate products do include them. The difference is that a proprietary guarantee depends on the lender’s own contractual promise. If the lender goes bankrupt or the loan transfers to a servicer with different policies, enforcement can get complicated. With a HECM, the federal government stands behind the guarantee regardless of what happens to the original lender.
Protection for a Younger Spouse
If your spouse is under 62, they cannot be a co-borrower on a HECM. Without further action, the loan would become due when the borrowing spouse dies or permanently moves to a care facility, potentially forcing the younger spouse out of the home. The HECM program addresses this through the Eligible Non-Borrowing Spouse designation.
To qualify for the deferral period, the non-borrowing spouse must have been married to the borrower at closing, been properly disclosed and named in the HECM documents, and occupied the home as a principal residence continuously.7U.S. Department of Housing and Urban Development. Mortgagee Letter 2014-07 – Non-Borrowing Spouse Deferral Period After the borrower’s death, the spouse has 90 days to establish legal ownership or a legal right to remain in the property, and must keep meeting the loan’s ongoing obligations, including property taxes and insurance.
There is a trade-off. The non-borrowing spouse’s age factors into the principal limit calculation, so a 62-year-old borrower with a 55-year-old eligible non-borrowing spouse qualifies for less money than a 62-year-old borrower with no younger spouse.1U.S. Department of Housing and Urban Development. Home Equity Conversion Mortgages for Seniors The borrowing spouse also has to annually certify that the marriage is intact and that the non-borrowing spouse still lives in the home.8Consumer Financial Protection Bureau. You Have a Reverse Mortgage – Know Your Rights and Responsibilities Divorce during the life of the loan can end the deferral protection.
Proprietary reverse mortgage protections for a younger spouse depend on the specific product and lender contract, not a federal rule.
Which One Fits Which Borrower
For most borrowers who qualify, the HECM is the default choice. FHA insurance, capped fees, mandatory counseling, the LESA safety net, non-recourse backing from the federal government, and the eligible non-borrowing spouse framework all come standard. You pay for that structure through the MIP, and you accept a lending limit tied to the HECM maximum claim amount.
A proprietary reverse mortgage generally makes sense when the HECM lending limit leaves too much of your equity on the table. If your home is worth several million dollars, a jumbo product can free up substantially more cash than a HECM will. You give up FHA insurance, standardized rules, and the federal counseling framework in exchange. Some proprietary products also open the door to borrowers between 55 and 61, which is not available under the HECM program.
Two situations are worth flagging because they sit outside this comparison. Cooperative housing units generally do not qualify for a HECM at all. And if you are looking at a HECM strictly for a low-value home with a young non-borrowing spouse, the age-based reduction to the principal limit can make the numbers tighter than you expect. In both cases, work the specifics with a HUD-approved counselor before signing anything.