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

There are three types of reverse mortgages: single-purpose reverse mortgages, proprietary reverse mortgages, and Home Equity Conversion Mortgages (HECMs). Each is built for a different kind of homeowner aged 62 or older who wants to turn home equity into cash without selling the house or making monthly mortgage payments. Which one fits you depends on how much your home is worth, what you want to do with the money, and whether a government-insured program is available where you live.

Single-Purpose Reverse Mortgages

Single-purpose reverse mortgages come from state and local government agencies and some nonprofit organizations.¹ The name is literal. The lender restricts the money to one approved purpose, usually paying property taxes, making essential home repairs, or covering accessibility upgrades. You cannot use the proceeds for general living expenses or to pay off credit card debt.

Because public agencies and nonprofits back these loans, they tend to 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 household income. The trade-off is availability. Not every state or city runs one, and the loan amounts are generally smaller than what a HECM or proprietary product would produce. When a program exists in your area and your need matches an approved use, this is almost always the cheapest route.

Proprietary Reverse Mortgages

Proprietary reverse mortgages are private loans built by individual lenders for homeowners whose properties are worth more than the federal HECM lending limit, which is $1,249,125 in 2026.² If your home sits well above that ceiling, a proprietary product (sometimes marketed as a jumbo reverse mortgage) can let you tap a larger share of equity than a government-insured loan allows.¹

These loans are not insured by the Federal Housing Administration, so lenders generally charge higher interest rates to offset the risk they are taking on. The terms come from the individual lender’s contract and applicable state lending laws rather than federal insurance rules, which means protections vary from product to product. 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 a private product.³

Home Equity Conversion Mortgages

The Home Equity Conversion Mortgage 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 and either own your home outright or carry enough equity to pay off the existing mortgage with the HECM proceeds at closing.⁵

How much you can borrow depends on your age, current interest rates, and your home’s appraised value, capped at the 2026 lending limit of $1,249,125.² Older borrowers and lower interest rates both pull more equity out of the same house. FHA insurance guarantees you will never owe more than the home is worth when it is sold, which makes every HECM non-recourse by default.⁶

Before you can apply, you must complete a counseling session with a HUD-approved third-party agency. The counselor walks through your finances, explains the loan, and discusses alternatives. You and the counselor then both sign Form HUD-92902; the lender cannot process your application without it.⁷ Sessions typically cost $125 to $200, with reduced fees available based on income at some agencies.

A HECM also carries a specific protection worth knowing about if you are married and only one spouse will be on the loan. For HECMs originated on or after August 4, 2014, HUD requires lenders to assess at closing whether the non-borrowing spouse qualifies for a deferral period that lets them remain in the home after the borrower dies. The spouse generally must have been married to the borrower at closing, keep the home as their principal residence, and continue meeting the loan’s property-charge obligations.⁸ No additional disbursements are available during the deferral, but foreclosure is postponed as long as those conditions hold.

How You Receive HECM Funds

Your disbursement choices depend on whether you take a fixed or an adjustable interest rate. A fixed-rate HECM gives you only one option: a single lump sum at closing. An adjustable-rate HECM opens up five:

Lump sum. A one-time payment of available funds at closing.
Line of credit. An available balance you draw from as needed; the unused portion grows over time at the loan’s interest rate plus the annual insurance premium.
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 choose.
Combination. A mix of monthly payments and a line of credit.

The growing line of credit is a common choice because the available balance expands over time, effectively increasing what you can access later even if your home’s value stays flat.

Comparing the Three

The simplest way to narrow the choice is to work from your situation back to the product.

If you have a specific, approved need such as a property tax bill or an accessibility renovation, and a program is offered where you live, a single-purpose reverse mortgage will almost always cost you the least. Check with your state housing agency or local Area Agency on Aging to see what is available.

If your home is worth more than the HECM limit of $1,249,125 and you want to draw on equity above that ceiling, a proprietary reverse mortgage is the only route that can reach it. Read the contract carefully, confirm the non-recourse clause, and compare interest rates and fees across lenders because the terms are not standardized.

If neither of those situations describes you, a HECM is the default. It is federally insured, non-recourse by rule, available nationwide through FHA-approved lenders, and the only type that offers the five disbursement options above.

What a Reverse Mortgage Costs and When It Comes Due

Whichever type you choose, a reverse mortgage is not free money. Costs vary by product, but a HECM gives a useful baseline for what to expect.

Initial mortgage insurance premium: 2% of the appraised value or the HECM lending limit, whichever is less. This can be financed into the loan.⁶
Annual mortgage insurance premium: 0.5% of the outstanding loan balance each year, added to what you owe.⁹
Origination fee: up to 2% of the first $200,000 of your home’s value plus 1% of the amount above that, capped at $6,000. Some lenders charge less or waive it to compete.
Appraisal: typically $400 to $900, performed by a HUD-approved appraiser.
Servicing fee: up to $30 per month on fixed-rate HECMs, up to $35 per month on adjustable-rate HECMs, set aside from your proceeds at closing.
Third-party closing costs: title insurance, recording fees, and the standard items you would see on any mortgage closing.

Many of these can be rolled into the loan, which is convenient but shrinks the equity available to you and lets the balance grow faster.

A reverse mortgage also carries ongoing obligations even though no monthly payment is due. The full balance, including accumulated interest and fees, becomes due and payable when the last borrower dies, when you sell the home, when you move out (including an extended stay in a care facility), or if you default on the loan.¹⁰ Default is the trigger that catches borrowers off guard: you remain responsible for property taxes, homeowners and flood insurance, and homeowner association fees, and falling behind on any of them can lead to foreclosure.¹¹ The lender must generally give you a chance to catch up before starting foreclosure, but the obligation itself is real and enforceable.

1
Consumer Financial Protection Bureau. Are There Different Types of Reverse Mortgages
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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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U.S. Department of Housing and Urban Development. Updates to Mortgagee Optional Election Assignment for HECMs
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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