The 3 Types of Reverse Mortgages: HECM, Proprietary & Single-Purpose

There are three types of reverse mortgages: single-purpose reverse mortgages offered by state and local agencies and some nonprofits, proprietary reverse mortgages issued by private lenders for higher-value homes, and Home Equity Conversion Mortgages (HECMs) insured by the federal government. All three let homeowners aged 62 or older convert equity into cash without monthly mortgage payments, but they differ in cost, how much you can borrow, and what you can spend the money on.

Single-Purpose Reverse Mortgages

Single-purpose reverse mortgages are offered by state and local government agencies as well as some nonprofit organizations.¹ The lender restricts how you can spend the money, typically to one specific purpose such as paying property taxes, making essential home repairs, or covering accessibility upgrades. You cannot use the proceeds for general living expenses or debt consolidation.

Because public agencies and nonprofits back these loans, they carry the lowest costs of any reverse mortgage. Some programs charge no interest at all; others charge a modest rate that varies by program and income level. The trade-off is limited availability. Not every state or municipality offers them, and the loan amounts are generally smaller than what a HECM or proprietary product would provide. If you qualify and your need matches the approved purpose, this is usually the least expensive option.

Proprietary Reverse Mortgages

Proprietary reverse mortgages are private loans built for homeowners whose properties are worth more than the federal HECM lending limit of $1,249,125 in 2026.² If your home is valued well above that ceiling, a proprietary product may let you access a larger share of your equity than a government-insured loan allows.¹ These loans are sometimes marketed as jumbo reverse mortgages.

Because these loans are not insured by the Federal Housing Administration, lenders typically charge higher interest rates to offset their risk. Terms are set by the individual lender’s contract and applicable state lending laws rather than federal insurance rules, so protections vary from one product to another. Before signing, confirm the contract includes a non-recourse clause, which prevents you or your estate from owing more than the home’s sale value when the loan comes due. Most reverse mortgages include this protection, but it is not guaranteed in private products.³

Home Equity Conversion Mortgages (HECMs)

The HECM is the only reverse mortgage insured by the federal government, and it is by far the most common type.⁴ HECMs are regulated under 24 CFR Part 206 and overseen by the Department of Housing and Urban Development. To qualify, you must be at least 62 years old and either own your home outright or have enough equity to pay off any existing mortgage with the reverse mortgage proceeds.⁵

How much you can borrow depends on your age, current interest rates, and your home’s appraised value, up to the 2026 lending cap of $1,249,125.² Older borrowers and those facing lower interest rates generally qualify for a higher percentage of the home’s value. FHA insurance guarantees you will never owe more than the home is worth when it is sold, making every HECM a non-recourse loan by default.⁶

Before you can apply for a HECM, you must complete a counseling session with a HUD-approved third-party agency. The counselor reviews your finances, explains how the loan works, and discusses alternatives. Both of you sign Form HUD-92902 certifying that counseling took place, and your lender cannot process the application without that certificate.⁷ Sessions typically cost between $125 and $200, with reduced fees available at some agencies based on income.

How You Receive the Money

A fixed-rate HECM limits you to a single lump-sum payment at closing. An adjustable-rate HECM gives you more flexibility. You can choose from:

Lump sum: a one-time payment of available funds at closing.
Line of credit: an available balance you draw from as needed, with the unused portion growing over time.
Tenure payments: equal monthly payments for as long as you live in the home as your primary residence.
Term payments: equal monthly payments for a fixed number of months you select.
Combination: a mix of monthly payments and a line of credit.

The line of credit is popular because the unused balance grows at the same rate as the loan’s interest rate plus the annual insurance premium, increasing the amount available to you over time.

How the Three Types Compare

Each type fits a different situation. A quick way to sort them:

Your home is worth less than the FHA cap and you need money for one approved purpose (repairs, taxes, accessibility): a single-purpose reverse mortgage is usually cheapest, if one is available where you live.
Your home is worth less than the FHA cap and you want flexibility in how the money is used or paid out: a HECM is generally the right fit, and it carries federal non-recourse protection.
Your home is worth well above $1,249,125 and you want to tap equity beyond what a HECM covers: a proprietary reverse mortgage may be the only option that reaches that equity, at the cost of a higher rate and terms that vary by lender.

What Any Reverse Mortgage Costs

Reverse mortgages carry upfront and ongoing costs that reduce the equity you actually receive. HECM fees are the most standardized:

Initial mortgage insurance premium: HUD charges 2% of the appraised value or the HECM lending limit, whichever is less. It can be financed into the loan balance.⁶
Annual mortgage insurance premium: 0.5% of the outstanding loan balance, charged yearly and added to what you owe.⁸
Origination fee: up to 2% of the first $200,000 of your home’s value and 1% of the amount above that, capped at $6,000. Some lenders charge less to compete for borrowers.
Appraisal: typically $400 to $900, performed by a HUD-approved appraiser.
Servicing fee: up to $30 monthly for fixed-rate HECMs and up to $35 for adjustable-rate HECMs, set aside from your available proceeds at closing.
Third-party closing costs: title insurance, recording fees, and other standard closing expenses.

Most of these can be financed into the loan rather than paid out of pocket, but rolling them in reduces the equity available to you and causes the balance to grow faster. Proprietary reverse mortgages set their own fee structures and generally carry higher interest rates than HECMs.

When the Loan Has to Be Repaid

None of these three types requires a monthly payment, but the full balance, including accumulated interest and fees, eventually comes due. Common triggers include the death of the last surviving borrower, selling the home, moving out permanently (including an extended stay in a care facility), and default on property taxes, homeowners insurance, flood insurance, or homeowner association fees.⁹¹⁰

The default trigger catches many borrowers off guard. You have no monthly mortgage payment, but you remain responsible for taxes, insurance, and basic maintenance. If you fall behind, the lender must generally give you a chance to catch up before starting foreclosure, but the obligation is real and enforceable. For a HECM, non-recourse protection means neither you nor your heirs will ever owe more than the home’s appraised value when it is sold; for a proprietary loan, that protection depends on the contract.

1
Consumer Financial Protection Bureau. Are There Different Types of Reverse Mortgages
2
U.S. Department of Housing and Urban Development. FHA Lenders Single Family
3
Federal Trade Commission. Reverse Mortgages
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U.S. Department of Housing and Urban Development. HUD FHA Reverse Mortgage for Seniors (HECM)
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Consumer Financial Protection Bureau. Can Anyone Take Out a Reverse Mortgage Loan
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eCFR. 24 CFR Part 206 – Home Equity Conversion Mortgage Insurance
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U.S. Department of Housing and Urban Development. Certificate of HECM Counseling
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Consumer Financial Protection Bureau. How Much Does a Reverse Mortgage Loan Cost
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Consumer Financial Protection Bureau. With a Reverse Mortgage Loan Can My Heirs Keep or Sell My Home After I Die
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Consumer Financial Protection Bureau. What Should I Do if I Have a Reverse Mortgage and I Received a Notice of Default or Foreclosure