Types of Reverse Mortgages

If you’re considering a reverse mortgage, it’s best to do your homework and educate yourself about your options.  Many people may not know that there are different types of reverse mortgage loans.  While the Federal Housing Administration insured loan program gets the most attention, there are two other types of reverse mortgages that you should also be aware of.

Single Purpose

This type of reverse mortgage is available through local, state and non-profit agencies and is typically less expensive than the other two.  As the name suggests, single purpose loans must be used for a specific purpose such as home renovations/repairs or paying property taxes.1


Proprietary reverse mortgages are best suited for more affluent borrowers with high value homes that are looking to access a larger amount of cash.1  These products are sometimes called “jumbo” loans due to the fact that they offer a higher lending limit above and beyond the typical $625,500 limit available with a HECM.  This type of loan is offered through private lenders and in some situations a counseling session is required.


A Home Equity Conversion Mortgage (HECM) is a Federal Housing Administration insured reverse mortgage.  A HECM enables seniors age 62 and older to access a portion of their home’s equity to obtain tax free2 funds without having to make monthly mortgage payments.3  HECMs are the most popular type of reverse mortgage.  The funds can be used any way you’d like4 such as for medical care, home repairs, unexpected expenses or you can simply save the money for a rainy day.  The amount of money you can receive is based on age, interest rates and the home’s appraised value.  You can receive the loan proceeds in a lump sum, monthly payments or as a line of credit.  With a HECM, any existing mortgage balance is paid off using the proceeds from the reverse mortgage loan.  Guidelines also require borrowers to attend a HUD approved counseling session prior to obtaining a HECM loan.

If you’d like to learn more about which reverse mortgage is right for you, please use our reverse mortgage calculator or call 800-218-1415.


1 The 3 Different Types of Reverse Mortgages – lendingtree.com, by Ashley Sweren, 10/13/15, https://www.lendingtree.com/reverse-mortgage/different-types-of-reverse-mortgages-article

2 Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.

3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.

4 You may need to set aside additional funds from loan proceeds to pay for taxes and insurance.

Author:  Meredith Manz