HECM vs. Proprietary Reverse Mortgage: Key Differences
A reverse mortgage lets homeowners 62 and older convert home equity into income without monthly payments. The two main types are the FHA-insured HECM (Home Equity Conversion Mortgage) and proprietary reverse mortgages from private lenders.
HECMs offer lifetime tenure payments—you can never be forced out as long as you live in the home, pay property taxes, and maintain insurance. The 2024 HECM lending limit is $1,149,825. Proprietary products can serve higher-value homes above this limit, but typically provide a fixed payout term rather than lifetime payments.
For a $500,000 home at age 68, a HECM might provide roughly $2,750/month for life, while a 15-year proprietary product might offer slightly more per month but stops after the term. If longevity is your concern, the HECM's lifetime guarantee is usually the safer choice.
Frequently Asked Questions
Yes. With both HECM and proprietary reverse mortgages, you retain title to your home. The lender places a lien on the property, but you remain the owner as long as you comply with the loan terms (residency, taxes, insurance, and maintenance).
No. Reverse mortgage payments are considered loan advances, not income, so they are generally not subject to federal income tax. They also do not affect Social Security or Medicare benefits. However, they may affect Medicaid eligibility if funds accumulate in a bank account.