The question “What Are The 3 Types Of Reverse Mortgages” centers on understanding the main categories of reverse Mortgage products available to U.S. homeowners, especially older adults seeking to convert home equity into cash. This guide outlines the three primary reverse mortgage types—Home Equity Conversion Mortgages (HECMs), proprietary (jumbo) reverse mortgages, and single-purpose reverse mortgages—explaining their key features, benefits, and key differences, along with eligibility, repayment, and risk factors.
Direct Answer
The three main types of reverse mortgages are:
Home Equity Conversion Mortgage (HECM): Federally insured, standardized by HUD, available to homeowners age 62+; most common type in the U.S.
Proprietary Reverse Mortgage: Private or “jumbo” reverse mortgages offered by financial companies, typically for higher-value homes; not federally insured.
Single-Purpose Reverse Mortgage: Usually provided by local/state agencies or non-profits for a specific approved use (e.g., property taxes, home repairs); limited availability.
The loan becomes due when the borrower sells the home, permanently leaves, or passes away.
Repayment can occur via selling the home, refinancing, or cash payoff; heirs may settle the balance or relinquish the property.
HECMs are non-recourse: You never owe more than the home’s value upon repayment (as per official HUD guidance).
Timelines and requirements differ by product and lender; consult official public resources for the latest policies.
Heirs typically receive notification of repayment deadlines and options.
Costs may include origination fees, mortgage insurance premiums for HECMs, interest, and servicing charges.
Who This Mortgage Is For
Older adults (typically 62+) seeking to tap home equity for supplemental income, home repairs, or covering living expenses.
Seniors who wish to age in place without monthly mortgage payments, provided they continue meeting property tax, insurance, and maintenance obligations.
Homeowners with substantial equity—reverse mortgages work best for those with low mortgage balances or fully paid-off homes.
Individuals whose financial planning does not anticipate moving within the near future, as the loan becomes due upon leaving the primary residence.
Households facing large, one-time expenses (with single-purpose reverse mortgages) such as property tax payments or health-related home modifications.
Owners of high-value properties considering proprietary/jumbo reverse mortgages that exceed standard federal limits.
Key Facts (At-a-Glance)
Feature
HECM
Proprietary (Jumbo)
Single-Purpose
Loan Purpose
Flexible any-purpose, federally insured
Flexible, for high-value homes
Limited to approved use (e.g. taxes, repairs)
Occupancy
Primary residence only
Primary residence (some lenders may allow more options)
Primary residence only
Minimum Age
62
Often 60-62 (varies)
Typically 62 (varies by provider)
Rate Type
Fixed or adjustable
Usually fixed or adjustable
Typically fixed
Term Options
Tenure, term, lump sum, LOC
Lump sum or structured
Lump sum to cover specific cost
APR
Varies (sample/illustrative)
Varies; typically higher
Varies; often subsidized
Points
Not typical
Not typical
Not typical
Loan-to-Value (LTV)
Lower than forward mortgages
Flexible, higher in some cases
Varies; lower than HECM
Debt-to-Income (DTI)
Not primary factor, but must evidence income/resources for obligations
Not all fees (taxes, homeowner’s insurance, maintenance) are calculated in APR; budgeting is essential.
Payments from lender to borrower are not taxable income, but check with the IRS for changing definitions.
Repayment occurs when home is no longer the borrower’s primary residence, upon death, or if obligations are not met.
Illustrative Example (sample/illustrative)
HECM
Proprietary
Single-Purpose
Origination Fee
$2,500–$6,000 (sample)
$5,000+ (sample)
Often $0–$1,000
Mortgage Insurance Premium (Initial/Annual)
2% up front; 0.5% annually (sample)
Not applicable
Not applicable
Interest Rate (APR)
6–8% (sample/illustrative)
7–10% (sample/illustrative)
Below market or 0%
Servicing Fees
$30–$35/month
Varies
Varies/Often none
Loan Amount
Up to FHA/HECM limit; LTV depends on age, rates, home value
Higher for expensive homes
Low caps (e.g., $10,000–$25,000)
Fixed vs Adjustable (ARM)
Reverse mortgages can be fixed-rate (entire proceeds delivered at closing) or adjustable-rate (withdraw over time as a line of credit or term/tenure payments).
Fixed rate reverse mortgages require full draws at closing—no further access to funds.
Adjustable-rate reverse mortgages enable partial withdrawals, with variable interest based on an index (e.g., LIBOR or SOFR) plus margin; these may have rate caps and periodic adjustment limits.
Most HECMs today are structured as adjustable-rate lines of credit for maximum flexibility.
Proprietary products may offer unique fixed/adjustable structures depending on the company.
Eligibility, Underwriting & Documentation
Borrower(s) must meet minimum age requirement (62 for HECM, varies for proprietary/single-purpose).
Home must be primary residence (single-family, some condos, HUD-approved multi-units, certain manufactured homes).
Underlying property must have sufficient equity; existing mortgage can often be paid off at closing.
Financial assessment includes evaluation of willingness/ability to pay property taxes, insurance, and basic upkeep (not standard DTI analysis, but sustainable finances required).
Required documentation: proof of age, residence, income/resources for taxes/insurance, property title, homeowner’s insurance, property tax statements, Social Security card, and possibly appraisal reports.
Mandatory HUD-approved counseling session (for HECMs) before proceeding.
Application, Disclosures & Closing Timeline
Start by researching the right reverse mortgage type, reviewing official criteria and consulting HUD for HECMs.
Schedule and complete mandatory reverse mortgage counseling (official HUD homepage for counselor resources).
Submit full application with documentation (ID, proof of residency, mortgage balance, property info).
Undergo home appraisal and financial assessment; lender will review property value and confirm ability to maintain taxes and insurance.
Receive Loan Estimate detailing expected rates, fees, and terms (HECMs follow official Loan Estimate and Closing Disclosure rules; see CFPB official homepage).
Three-day right of rescission after closing for most reverse mortgages (except some purchase-money arrangements).
Funds disbursed according to chosen structure (lump sum, line of credit, or periodic payments).
Government-Backed & Special Programs
HECMs are overseen by HUD and insured by FHA; comprehensive borrower protections and requirements apply (see official HUD homepage).
VA and USDA do not currently offer reverse mortgage programs of their own.
Many state/local housing agencies and non-profit organizations provide single-purpose reverse mortgages, usually for limited, urgent financial needs (visit your state’s housing department for program specifics).
Rate Locks, Points & When to Reprice
HECM interest rates are typically locked at closing and disclosed in advance via the Loan Estimate and Closing Disclosure.
Discount points do not commonly apply to reverse mortgages, but origination and other fees can be substantial.
Proprietary reverse mortgages may structure rate locks differently, and lock periods may vary.
Repricing can occur if interest rates change before closing or if the home appraises differently than expected.
Refinance & Remortgage Options
Reverse mortgage holders can refinance into a new HECM to access more funds if equity and property values rise or program rules change.
Rate-and-term reverse mortgage refinancing is an option, but subject to eligibility and cost-benefit analysis.
Conventional or HECM-to-forward mortgage refinancing is possible if a borrower (or heirs) wish to pay off the reverse mortgage and reclaim equity.
Breaking even depends on time in the property, interest rate changes, costs, and home appreciation.
Risks & Responsible Borrowing
Foreclosure can occur if property taxes, homeowners insurance, or maintenance requirements go unmet.
Steadily increasing loan balance reduces available equity and inheritance, especially if home values decline.
Borrowers should have realistic plans for future living, health, and moving needs as the loan becomes due at permanent vacating of the property.
Reverse mortgages can impact eligibility for Medicaid and other need-based programs; consult a certified counselor or public agency.
Alternatives & Comparisons
Downsizing to a smaller home to free up equity.
Home equity loan or line of credit (HELOC), requiring regular repayments.
Request a formal payoff statement from lender to determine balance owed.
Commission appraisal to establish Fair Market Value; lenders may use their own appraiser.
Heirs generally have the option to repay the lesser of loan balance or 95% of home’s appraised value (for HECMs, see official HUD guidance).
Meet lender’s notification and settlement deadlines; request extensions if needed.
If–Then Decision Lists
If you plan to move permanently: consider selling or paying off loan; reverse mortgage will become due.
If your spouse/co-borrower remains in home: loan typically continues as long as obligations are met and spouse is qualified.
If heirs want to keep the property: they must repay the outstanding balance (potentially via refinance or other assets).
If property value is less than outstanding loan (HECM): heirs can satisfy debt by transferring title (non-recourse feature).
Methodology & Assumptions
This content is based on sample and illustrative values for rates, costs, and timelines as of October 2025.
Main categories and rules aligned with publicly available details from HUD, FHA, and the Consumer Financial Protection Bureau.
Attributes, costs, and local program details may change annually; always confirm directly with the official HUD homepage or your state housing agency.
Review & Update
Reviewed by mortgage content analyst, October 2025.
Figures are sample/illustrative unless referenced from official public sources.
Related Questions (Quick Answers)
What is a Home Equity Conversion Mortgage (HECM)?
It is the most common, federally insured reverse mortgage in the U.S., backed by HUD and FHA.
Requires homeowner(s) to be at least 62, with significant home equity.
Offers protections for borrowers and heirs not available in other types.
How does a proprietary (jumbo) reverse mortgage differ from HECM?
It’s privately offered, not federally insured, and often serves homes exceeding FHA limits.
May allow larger loan amounts, but with less regulatory oversight.
Terms, rates, and costs vary by lender and are not standardized.
Who offers single-purpose reverse mortgages?
State/local housing agencies, community nonprofits, and some government-funded programs.
Restricts funds to uses like home repairs or paying property taxes.
Usually lower or subsidized rates, but availability is limited.
When does a reverse mortgage become due?
When the borrower sells the home, leaves permanently (e.g., moves to assisted living), or passes away.
Lender must be notified if the homeowner leaves the primary residence.
Heirs or estate have a set period (sample: 6-12 months) to settle the loan.
Can a reverse mortgage run out of money?
Yes, if the borrower draws all funds or a credit line is exhausted; monthly tenure payments stop if principal is depleted.
Homeowner is still obligated to pay taxes, insurance, and upkeep.
HECM borrowers cannot be evicted simply for outliving the loan funds; they can stay as long as obligations are met.
Frequently Asked Questions
What fees are involved in a reverse mortgage?
Origination and closing costs, interest, and servicing fees.
MIP is required for HECMs; proprietary/single-purpose may differ.
Budget for property taxes, insurance, and maintenance.
Do I lose ownership of my home with a reverse mortgage?
No, you retain title and ownership as long as you meet loan obligations.
On death or move, the lender is repaid from sale proceeds (or refinancing).
Will my heirs inherit debt from the reverse mortgage?
No. For HECMs, neither you nor your heirs will owe more than the home’s value at the time of repayment (non-recourse feature).
Heirs can pay off the loan and keep the home, or sell/transfers as settlement.
What happens if home value falls below the loan balance?
For HECMs: FHA insurance covers the difference, and neither borrower nor heirs are responsible for a shortfall.
Proprietary loans may not always offer the same protection—read terms carefully.
Conclusion & Next Steps
Reverse mortgages—HECM, proprietary, and single-purpose—offer tailored solutions for accessing home equity in retirement, but carry significant obligations and risks.
Understand your eligibility, repayment triggers, and all fees/costs before proceeding.
