If you have started looking into using your home to help fund retirement, you have probably run into the phrase “reverse mortgage” used as if it names a single product. It does not. A reverse mortgage is a category, and underneath it sit three distinct loan types that differ in who insures them, how much you can borrow, what the money can be used for, and how much they cost. Choosing the wrong one can mean paying for protections a particular home never needed, or discovering too late that the money cannot be spent the way you planned.
For a homeowner weighing this decision — often in their sixties or seventies, sometimes an adult child helping a parent think it through — the differences between the three types matter far more than the marketing. This post lays the three reverse mortgage types side by side, explains the borrower each one tends to fit, and covers the obligations and trade-offs that apply no matter which version you choose.
What Actually Counts as a Reverse Mortgage?
A reverse mortgage lets an older homeowner convert part of the equity in their home into cash without taking on a required monthly mortgage payment. Instead of you paying down a balance, the balance grows over time as interest and fees are added to it. The loan comes due when the last borrower sells the home, moves out permanently, or passes away. Until then, you keep the title, and you keep living in the house as your primary residence.
Before comparing the three types, it helps to be solid on the fundamentals of how a reverse mortgage works — how the balance grows, when it becomes due, and what stays your responsibility. Those mechanics are the same across all three versions. What changes from type to type is who backs the loan, how large it can be, and what strings are attached to the money.
The one feature all three versions share
Every reverse mortgage removes the required monthly principal-and-interest payment, but none of them removes your other duties as the homeowner. You still have to pay your property taxes and homeowners insurance, keep the home in reasonable repair, and live there as your main residence. Falling behind on any of those can put the loan into default, even though there is no monthly payment in the traditional sense. That obligation is the single most important thing to understand before you look at which type fits, because it is true of the HECM, the proprietary loan, and the single-purpose loan alike.
How Do the Three Reverse Mortgage Types Differ?
The three types of reverse mortgages are the Home Equity Conversion Mortgage, the proprietary reverse mortgage, and the single-purpose reverse mortgage. They are not tiers of the same loan; they are three different products built for three different situations. Here is how each one works and where it stands apart.
The HECM: the FHA-insured reverse mortgage
The Home Equity Conversion Mortgage, or HECM, is the type most people mean when they say “reverse mortgage.” It is insured by the Federal Housing Administration, which is why it comes with standardized rules and consumer protections that the private products do not have to match. The youngest borrower must be at least 62, and the loan requires independent counseling with a HUD-approved counselor before it can proceed.
A HECM lets you use the money for any purpose, and it offers flexible ways to receive it: a lump sum, a line of credit you draw on as needed, fixed monthly advances, or a combination. The line-of-credit version has a feature many borrowers value, in that the unused portion can grow over time, giving you access to more later. The main ceiling on a HECM is the FHA lending limit, a national cap set each year. Because it is federally insured, a HECM is also non-recourse, meaning neither you nor your heirs will ever owe more than the home is worth when the loan is repaid. The trade-off for all of that protection is cost: a HECM carries an upfront and an annual FHA mortgage insurance premium on top of origination and closing costs.
The proprietary reverse mortgage: the jumbo option
A proprietary reverse mortgage is a private loan created and backed by an individual lender rather than the federal government. Its main reason to exist is the FHA lending limit: if your home is worth considerably more than that annual cap, a HECM will not let you tap the equity above it, but a proprietary loan can. For that reason these are often called jumbo reverse mortgages, and they are aimed at higher-value homes.
Because a proprietary loan is not FHA-insured, it carries no FHA mortgage insurance premium, which can lower some costs, but it also means the federal HECM protections and standardized rules do not automatically apply. Terms, fees, interest rates, and the minimum age all vary by lender, and some lenders offer proprietary loans to borrowers as young as 55. Like a HECM, the money can typically be used for any purpose. If you own a high-value home and want to access more equity than a federally capped loan allows, this is the lane to compare carefully, lender by lender.
The single-purpose reverse mortgage: the low-cost, restricted option
The single-purpose reverse mortgage is the least expensive of the three and the least known. It is offered by some state and local government agencies and by certain nonprofit organizations, not by mainstream mortgage lenders. The catch that gives it its name is that the money can be used for only one purpose that the lender specifies in advance — most often property taxes or a needed home repair.
Single-purpose loans frequently come with income limits, and they are not available everywhere, so eligibility depends heavily on where you live and what programs your area runs. But for a homeowner whose real problem is a single recurring bill or a one-time repair, this option can be dramatically cheaper than either a HECM or a proprietary loan. It is worth asking about before assuming a full reverse mortgage is the only way to solve a narrow, specific need. A reverse mortgage is only one way to draw on what your home is worth; depending on your goal, there are other ways to put your home equity to work that may serve you better than any reverse product.
Which Reverse Mortgage Type Fits Your Situation?
The right type follows from a few honest answers: how your home’s value compares to the FHA lending limit, what you actually want the money for, how sensitive you are to cost, and how much flexibility you need in how the funds arrive. Sorting the three types of reverse mortgages against those questions usually points clearly to one lane.
The HECM tends to fit a homeowner with a typical-value home who wants flexibility — especially the growing line of credit — and who values the federal insurance and the non-recourse guarantee. It is the default for a reason: broad availability, standardized rules, and the ability to use the money however you like. The proprietary loan fits the owner of a high-value home above the FHA cap who wants to reach more equity than a HECM allows, and who is comfortable trading federal insurance for a larger potential loan. The single-purpose loan fits a cost-conscious homeowner with a modest, specific need, such as staying current on property taxes, who qualifies for a local program and does not need open-ended access to cash.
It is also worth stepping back to ask whether a reverse mortgage is the right tool at all. If your real goal is to buy or refinance and you still have qualifying income, remember that borrowers can qualify for a traditional mortgage well into retirement. A reverse product is not the only option once you pass a certain age, and for some homeowners a conventional loan, a refinance, or simply staying put pencils out better than any of the three reverse types.
What Should You Watch Out for Before Choosing One?
Whichever type you lean toward, the same handful of realities deserve a close look. The first is the ongoing obligation already mentioned: property taxes, homeowners insurance, upkeep, and primary residence. A reverse mortgage does not erase those, and letting one slip is the most common way borrowers get into trouble with a loan that otherwise has no monthly payment.
Cost is the next. A HECM’s FHA mortgage insurance premiums buy real protection, but they add to the price. A proprietary loan skips that premium yet may carry a higher interest rate or different fees. A single-purpose loan is cheapest but restricts what the money can do. There are also considerations that reach beyond the loan itself: a non-borrowing spouse needs to understand how the rules protect — or do not protect — their ability to stay in the home, and taking on loan proceeds can affect eligibility for needs-based benefits such as Medicaid. Heirs should know that the loan becomes due when the last borrower leaves, at which point they can repay or refinance the balance to keep the home, or sell it, with the non-recourse feature capping what is owed on a HECM.
Because the three types are underwritten and priced so differently, this is a decision to model with an experienced reverse mortgage specialist against your specific home value, age, and goals — not one to make from a brochure or a television ad. As a Christian-based lender, Fellowship Home Loans approaches this the way a reverse mortgage should be approached: patiently, without pressure, and with the reader’s long-term security in view rather than a quick sale. The counseling requirement on a HECM exists for the same reason, and it is a protection worth using even when a proprietary or single-purpose loan would not strictly require it.
Frequently Asked Questions
What are the three types of reverse mortgages?
The three types are the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration and is by far the most common; the proprietary reverse mortgage, a private loan often used for higher-value homes; and the single-purpose reverse mortgage, a low-cost loan offered by some state or local government agencies and nonprofits for one lender-approved purpose such as property taxes or home repairs.
Which reverse mortgage is the most common?
The FHA-insured HECM accounts for the large majority of reverse mortgages. Because it is federally insured and available through many lenders, it is the version most people picture when they hear the term. Its borrowing amount is capped by an FHA lending limit that is set each year, which is one reason higher-value homes sometimes look at a proprietary loan instead.
What is the difference between a HECM and a proprietary reverse mortgage?
A HECM is insured by the FHA, requires independent HUD-approved counseling, and caps how much you can borrow at the annual FHA lending limit. A proprietary reverse mortgage is a private product that is not FHA-insured, so it carries no FHA mortgage insurance premium and can sometimes unlock more money on a high-value home. Terms, costs, and the minimum age vary by lender on proprietary loans, while HECM rules are standardized by the government.
What is a single-purpose reverse mortgage?
A single-purpose reverse mortgage is the least expensive of the three, offered by some state and local government agencies and nonprofit organizations. The trade-off is that the money can be used for only one purpose the lender specifies — commonly property taxes or a home repair. These loans often carry income limits and are not available in every area, but for a homeowner who needs to cover a single specific bill, they can be the most affordable option by far.
Do all reverse mortgages require you to be 62?
The FHA-insured HECM requires the youngest borrower to be at least 62. Some proprietary reverse mortgages accept borrowers as young as 55, depending on the lender and the state. Single-purpose programs set their own eligibility rules. Age also affects how much you can borrow: the older the youngest borrower, the larger the share of equity a reverse mortgage will generally make available.
How much can I borrow with a reverse mortgage?
The amount depends on the age of the youngest borrower, your home’s value, current interest rates, and which type you choose. A HECM is limited by the annual FHA lending limit, so a home worth far more than that cap will not unlock additional equity through a HECM. A proprietary loan can sometimes reach higher amounts on a high-value home, while a single-purpose loan is typically the smallest because it is tied to one approved expense.
Is reverse mortgage counseling required?
A HECM requires independent counseling with a HUD-approved counselor before the loan can move forward. Even when counseling is not strictly required for a proprietary or single-purpose loan, it is worth doing. The session reviews the costs, the obligations you keep as the homeowner, and the alternatives, so you can confirm a reverse mortgage is the right tool before you commit.
What Is Your Next Step With Fellowship Home Loans?
The takeaway is simple: a reverse mortgage is one name for three very different loans, and the right choice depends on your home’s value, your goal for the money, and how much cost and flexibility matter to you. Matching the type to your situation up front is what keeps a reverse mortgage from becoming an expensive answer to a question a cheaper option could have solved.
Fellowship Home Loans helps homeowners weigh whether a reverse mortgage fits at all, and if so which of the three types, as part of walking every borrower through the mortgage process from application through closing. A calm, unrushed conversation with a loan officer can clarify how your home value lines up against the FHA limit, which type your goals point to, and whether a more traditional path fits better. The decision starts with your specific situation, not with a headline product name.
