Proprietary Reverse Mortgage Versus HECM for Seniors

For homeowners aged 62 and older, a reverse mortgage can turn home equity into usable cash without requiring monthly mortgage payments. But the term "reverse mortgage" covers more than one product. Two main categories dominate the market: the federally insured Home Equity Conversion Mortgage (HECM) and proprietary reverse mortgages, often called jumbo reverse mortgages. Choosing between them affects how much you can borrow, what you pay upfront, and how much flexibility you have. This guide breaks down the proprietary reverse mortgage versus HECM for seniors comparison so you can decide which structure fits your retirement goals.

What Is a HECM and How Does It Work?

The HECM is the most common reverse mortgage in the United States. It is insured by the Federal Housing Administration (FHA) and backed by the U.S. Department of Housing and Urban Development (HUD). Because of that federal backing, lenders can offer standardized terms, and borrowers gain protections such as non-recourse limits (you can never owe more than the home is worth at repayment) and mandatory counseling before closing.

To qualify for a HECM, you must be at least 62 years old, own your home outright or have a substantial amount of equity, and use the property as your primary residence. The home must meet FHA property standards, and you must stay current on property taxes, homeowners insurance, and HOA dues. The loan amount you can receive depends on your age, the current interest rate, and the appraised value of your home, but there is a national lending limit, which adjusts annually. As of 2026, the HECM lending limit is $1,209,750 for most areas.

HECM payouts come in several forms: a lump sum, monthly installments, a line of credit, or a combination. The line of credit option is particularly popular because the unused portion grows over time, giving you a larger borrowing reserve in later years. You can also choose a fixed or adjustable interest rate, though fixed-rate HECMs require you to take the entire loan as a lump sum.

What Is a Proprietary Reverse Mortgage?

A proprietary reverse mortgage is a private-label loan offered by a specific lender without FHA insurance. These products are designed for homeowners with high-value homes who need to borrow more than the HECM limit allows. Because they are not federally insured, lenders have more flexibility to set their own terms, including higher lending limits, different fee structures, and sometimes more lenient property standards.

Proprietary reverse mortgages are not standardized across the industry. Each lender designs its own product, so features like interest rates, origination fees, and payout options can vary widely. Some proprietary loans offer a line of credit, while others focus on lump-sum payouts. Most require the borrower to be at least 62, though a few lenders set a higher minimum age, such as 65 or 70.

The key advantage of a proprietary reverse mortgage is that it can unlock significantly more equity for homeowners whose properties are worth well above the HECM ceiling. For example, if your home is appraised at $2.5 million, a HECM would cap your borrowing base at $1,209,750 (before applying age and rate factors), while a proprietary loan might let you access a much larger portion of your home's value.

Before you commit to any reverse mortgage, it helps to understand the full range of costs and trade-offs. Our guide on reverse mortgage for seniors: pros, cons, and costs walks through the expenses that apply to both HECM and proprietary loans.

Key Differences: Proprietary Reverse Mortgage Versus HECM for Seniors

When comparing a proprietary reverse mortgage versus a HECM for seniors, the differences fall into several practical categories: lending limits, upfront costs, insurance, counseling, and availability. Understanding these distinctions will help you ask the right questions when you speak with lenders.

Here is a side-by-side look at the most important features:

• Lending limit: HECMs have a national limit ($1,209,750 in 2026), while proprietary loans can go much higher, often up to $4 million or more depending on the lender.
• FHA insurance: HECMs include an upfront and annual mortgage insurance premium (MIP). Proprietary loans do not carry FHA insurance, so no MIP is charged.
• Counseling: HECM borrowers must complete HUD-approved counseling before closing. Proprietary loans may not require counseling, though many lenders recommend it.
• Closing costs: HECMs have standardized fees, including the upfront MIP (2% of the appraised value or $1,209,750, whichever is less). Proprietary loans have their own fee schedules, which can be higher or lower depending on the lender.
• Payout options: HECMs offer lump sum, monthly payments, line of credit, or a mix. Proprietary loans vary by lender, but many focus on lump sum or growing lines of credit.
• Property standards: HECMs must meet FHA minimum property requirements. Proprietary loans may have more flexible property guidelines, which can help if your home needs repairs or has unique features.

One of the most significant trade-offs involves the upfront mortgage insurance premium. On a HECM, you pay an upfront MIP of 2% of the appraised value (capped at the lending limit) plus an annual MIP of 0.5% of the outstanding loan balance. That insurance protects you and the lender if the loan balance exceeds the home's value when the loan becomes due. Proprietary loans skip that insurance, which can reduce your upfront costs, but you also give up the federal backstop. If the housing market drops sharply, a proprietary lender may have less flexibility to absorb a loss, though non-recourse protections still apply in most states.

Another difference is the availability of fixed-rate options. HECMs offer fixed rates, but only if you take a lump sum. Proprietary loans may offer fixed or adjustable rates with more varied payout structures. If you want a fixed rate and a line of credit, you may need to shop carefully or consider a proprietary product.

When a HECM Makes More Sense

A HECM is often the better choice if your home's value is at or below the FHA lending limit and you want the predictability of a federally insured product. The standardized counseling requirement, while sometimes seen as an extra step, gives you a chance to review your finances with an independent expert before signing. That can be especially valuable if you are new to reverse mortgages or if your retirement budget is tight.

HECMs also tend to be more widely available. Most reverse mortgage lenders offer HECMs, so you can compare quotes from multiple companies and choose the one with the best combination of rates and fees. Proprietary loans are offered by a smaller number of lenders, which can limit your shopping options.

If you plan to stay in your home for many years and want a growing line of credit that you can tap as needed, a HECM line of credit is a strong candidate. The unused portion grows at the same rate as the loan's interest, giving you increasing access to funds over time. That feature is not always available with proprietary products, and when it is, the terms may differ.

When a Proprietary Reverse Mortgage Makes More Sense

If your home is worth well above the HECM limit, a proprietary reverse mortgage may be the only way to access a meaningful amount of equity. For example, if you own a $2 million home in a high-cost market and want to extract $800,000, a HECM alone cannot get you there because of the lending cap. A proprietary loan can.

Proprietary loans can also be attractive if you want to avoid the upfront MIP. On a $1.5 million home, the HECM upfront MIP would be capped at 2% of $1,209,750, or about $24,195. A proprietary loan might charge a lower origination fee, saving you thousands upfront. However, you need to compare the ongoing interest rate and fees carefully, because a lower upfront cost can be offset by a higher rate over time.

Another scenario where proprietary loans shine is when your property does not meet FHA standards. Maybe you have a mixed-use property, a home with a small commercial space, or a dwelling that needs significant repairs. FHA guidelines can be strict, while proprietary lenders may be more flexible. That flexibility can make the difference between getting a loan and being turned down.

Before choosing any reverse mortgage, it is wise to compare real-time rate offers from multiple lenders. A platform like RateChecker can help you see how proprietary and HECM rates stack up side by side, so you can weigh the trade-offs with current data rather than estimates.

Costs to Compare: Fees, Rates, and Long-Term Impact

When you evaluate a proprietary reverse mortgage versus a HECM for seniors, the total cost over the life of the loan matters more than any single fee. Both products charge origination fees, closing costs, servicing fees, and interest. The HECM adds mortgage insurance premiums, while proprietary loans may have higher interest rates or lender-specific fees.

To compare costs fairly, ask each lender for a Loan Estimate that breaks down:

1. Upfront costs: Origination fee, closing costs, upfront MIP (if HECM), and any other initial charges.
2. Ongoing costs: Interest rate (fixed or adjustable), annual MIP (if HECM), servicing fee, and any line-of-credit growth rate.
3. Payout terms: How much you can access initially, how the line of credit grows (if applicable), and whether you can change payout options later.
4. Repayment conditions: What triggers repayment (sale, move-out, death), and how non-recourse protections apply.

Run the numbers for your specific situation. A lower upfront cost might look appealing, but if the interest rate is 1% higher, the long-term cost could be much greater. Conversely, a HECM's upfront MIP might be worth it if you value the federal insurance and the growing line of credit. Use a mortgage calculator to estimate how different rates and fees affect your loan balance over 10, 15, or 20 years.

Also consider how long you plan to stay in the home. If you expect to move in five years, the upfront costs matter more. If you plan to age in place for 20 years, the ongoing rate and line-of-credit growth become more important. There is no one-size-fits-all answer; the right choice depends on your time horizon and financial goals.

Eligibility and Counseling Requirements

Both HECM and proprietary reverse mortgages require you to be at least 62 years old and to own your home as your primary residence. You must have enough equity to cover the loan amount and any existing mortgage, which is typically paid off at closing using proceeds from the reverse mortgage. You also need to demonstrate the financial capacity to pay property taxes, insurance, and other ongoing expenses.

HECM borrowers must complete counseling with a HUD-approved counselor. This session typically lasts 60 to 90 minutes and covers the pros and cons of reverse mortgages, alternatives, and your responsibilities as a borrower. The counselor does not approve or deny your loan; they simply ensure you understand what you are signing. Proprietary loans may not require counseling, but many lenders encourage it, and some states mandate it.

Financial assessment is another common requirement. Lenders will review your credit history, income, and assets to determine whether you can keep up with property charges. If your finances are tight, the lender may set aside a portion of the loan proceeds in a escrow account to cover taxes and insurance. That reduces your available cash but protects you from default.

Making the Right Choice for Your Retirement

The decision between a proprietary reverse mortgage and a HECM comes down to your home's value, your cash needs, and your tolerance for complexity. If your home is within the FHA limit and you want a standardized, federally insured product with a growing line of credit, a HECM is often the straightforward choice. If your home is high-value and you need to access a larger sum, or if you want to avoid the upfront MIP, a proprietary loan may be the better fit.

Whichever path you choose, gather quotes from multiple lenders and compare the total cost, not just the headline rate. Ask about fees, payout flexibility, and what happens if you need to sell or move. A reverse mortgage is a powerful tool, but it works best when it aligns with your long-term plans. Take your time, ask questions, and consider speaking with a financial advisor who understands reverse mortgages. With the right information, you can turn your home equity into a resource that supports your retirement for years to come.