10/27/2026
If you’ve ever thought “a reverse mortgage means the bank gets my house,” you’re not alone. It’s the number-one misconception I hear, and it keeps a lot of people from even looking into something that might help them. So let’s clear it up first: a reverse mortgage is just a mortgage. There’s a lien against your house, like any mortgage. The difference is you’re not making monthly mortgage payments.
There are two basic versions of a reverse mortgage, each with variations. The one used most frequently is the FHA-insured one — though proprietary products are gaining a lot of traction. It’s officially a Home Equity Conversion Mortgage, typically called a HECM (we pronounce it “heck-um”). The other is a proprietary reverse mortgage: not government-backed, created by a lender with its own rules. Most of the rules are the same as the HECM, but there are enough differences that sometimes the proprietary is the better choice — or the only way to get it done at all.
Fixed rate or adjustable rate
The HECM can be fixed or adjustable, and so can the proprietary. Like regular mortgages, the fixed rate is usually higher than the adjustable — and because of that higher rate, you start out with less money. The fixed rate is one lump sum, with a limit on how much you can take in the first year: 60 percent of the available funds. (There’s an exception — if your existing liens and closing costs need more than 60 percent to be paid off, you can go beyond it.)
The adjustable rate is more flexible, and you get more money. You can take funds three ways: a lump sum (with that same 60 percent first-year limit), monthly disbursements coming to you, or a line of credit you draw from as needed — or a combination of all three.
Why only 60 percent in the first year? Around 2008, borrowers could take every dollar on day one. Then the housing market crashed, and FHA — which insures these loans and collects a mortgage insurance premium on them — took heavy losses. Congress changed the rules to protect the program. That’s where the 60 percent limit comes from.
Any money you don’t take up front or as monthly payments sits in the line of credit — and that line of credit is unusual: it grows at the same interest rate we charge you on the money you’re actually using. It’s the adjustable-rate version that opens up the strategic moves we’ll talk about in the other posts: delaying Social Security to maximize it, delaying draws from retirement funds, and planning for long-term care.
What about the proprietary reverse mortgage?
The proprietary used to be called a jumbo — years ago you needed something like a $2 million home to make it work. That’s changed: these days, homes valued above $300,000 may qualify using MOOM’s Secure Equity product — we just changed some guidelines. Its advantages: there’s no FHA home-value cap — FHA runs its calculation off about a million two and change, while the proprietary uses the full value, so someone with an $8 million home gets the calculation on the full $8 million. The rules can also fit borrowers the HECM doesn’t allow — for example, qualifying at age 55 instead of 62 — the condo rules are looser [VIDEO], and there’s even a second-mortgage option that can sit behind a regular mortgage.
The trade-offs: since it isn’t FHA-insured, the interest rates are higher and the line-of-credit option isn’t as flexible — and there are other variations. That’s why, for every client, we run both side by side and see which one actually makes the most sense.
How is the amount determined?
Three things: the value of your home, the age of the youngest borrower (it’s designed to last both lifetimes), and current interest rates. Of the three, rates move the needle most — a quarter point in interest can mean roughly $10,000 in proceeds, where a year of age might mean $3,000.
And when does it come due? Like any mortgage: when you sell, when you move, or when the borrowers pass away. It really is just a mortgage — one that doesn’t ask you for a monthly payment.
