There are primarily 3 types of reverse mortgages

  1. single-purpose reverse mortgages – generally provided by state and local government agencies, and some non-profit organizations
  2. federally-insured reverse mortgages– also known as Home Equity Conversion Mortgages (HECMs), these loans are backed by the US Department of Housing and Urban Development (HUD)
  3. proprietary reverse mortgage loans – private loans backed by the companies that offer them.

Single-purpose Reverse Mortgages

Single-purpose reverse mortgages typically have the lowest cost structure. These loans tend to be the most restrictive though, as they are usually only available to low to moderate income individuals, are typically quite limited in size, and the loan can only be used for the purpose specified by the lender, ie: property taxes, home improvement, etc.

To see if you qualityfy for a single-purpose reverse mortgage contact the local Area Agencies on Aging (AAAs) by looking them up online at or calling toll-free, 1-800-677-1116.

Home Equity Conversion Mortgages

Home Equity Conversion Mortgages  have a significant upfront cost (including a 2% origination fee and a 2% insurance premium), so if you only intend to stay in your home for a short period of time they can be quite expensive. If you live in your house for an extended period of time the cost is divided amongst many years, and is thus more reasonable.

  • Unlike single-purpose reverse mortgages, you can use a HECM loan for any purpose.
  • HECMs are the most popular reverse mortgage, with roughly 90% of reverse mortgage borrowers choosing them.
  • Since HECMs are federally insured they typically allow larger loan advances than other reverse mortgage formats, and are ideal for homes worth less than $400,000.
  • The payouts depend on a variety of factors – including age, home value, how much you own, where you live (particularly rural vs urban areas), and interest rates.

Proprietary Reverse Mortgage Programs

If you own a large and/or high-valued home your desired loan amount may exceed the limits of a traditional HECM. There are a number of proprietary reverse mortgage plans that may suit your needs.

  • Fannie Mae sponsors the Home Keeper reverse mortgage loan program, which offers a slightly higher loan limit ($417,000 in 2007) than a traditional HECMs, and is more flexible, allowing seniors to buy a new home with a down payment (perhaps from the sale of an old home) and a reverse mortgage.
  • Financial Freedom is one of the more popular private companies offering jumbo reverse mortgage loans, under their Cash Account Advantage plan. Under their Cash Account Advantage plan they offer  an Equity Choice Feature which allows you to preserve anywhere from 10% to 50% of your home’s value.

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