Three Basic Types of Reverse Mortgages

In a nutshell, there are three types of reverse mortgages.

1. Single-Purpose
2. Government Insured Reverse Mortgages
3. Proprietary Reverse Mortgages

Single-Purpose

This type probably isn't why you visited this site to read up on reverse mortgages. Single-purpose reverse mortgages are offered by some state and local government agencies. Each loan can only be used for a single purpose, hence the name "single-purpose".

For example, some are limited to home repairs, others to paying property taxes. These plans generally have maximum income eligibility requirements, but the cost is usually very low or moderate.

Government Insured Reverse Mortgages
Federally-insured reverse mortgages are called Home Equity Conversion Mortgages (or HECMs" which you may hear people pronounce as "Heck-ums"). This is the type of loan I am most familiar with and will discuss the most while writing this blog. The HECM loan is insured by the FHA.

Proprietary Reverse Mortgage
Proprietary reverse mortgages come from private companies; they are developed, owned, and insured by private companies. According to a source I use to learn about reverse mortgages offered by the Neighborhood Reinvestment Training Institute they are the most expensive type of reverse mortgage, and generally only provide competitive loan advance amounts on the most highly valued homes. At present, one of these plans is available nationwide, and the other is available in the most populated states.

The two most popular proprietary reverse mortgages available in the United States are:

--"Cash Account" from Financial Freedom

--"Home Keeper" from Fannie Mae.

In another article I will revisit the three basic types and compare them.