Proprietary reverse mortgage: What borrowers should know

If you own a high-value home and want to access more of your equity than you can get with a home equity conversion mortgage, a proprietary reverse mortgage may be worth exploring. These private loans let older homeowners borrow beyond government-backed limits, though they carry their own costs. While Rocket Mortgage doesn’t offer reverse mortgages, we can help you understand how they work.

Key takeaways:

• A proprietary reverse mortgage is a private loan not insured by the federal government, typically designed for homeowners with high-value properties.
• Older homeowners can use a proprietary reverse mortgage to borrow their equity and make no payments on the home until they no longer live in it.
• A HUD-approved housing counselor and multiple lender quotes can help you borrow more with fewer surprises and avoid fraud.

What is a proprietary reverse mortgage?

A proprietary reverse mortgage is a private loan that lets homeowners convert home equity into cash without selling their home or taking on a monthly payment. Instead of making monthly payments to reduce your balance, you receive cash and your balance increases and accrues interest.

Unlike a home equity conversion mortgage (HECM), a proprietary reverse mortgage isn’t insured by the Federal Housing Administration (FHA), so lenders set their own limits, eligibility rules, and property guidelines.

How does a proprietary reverse mortgage work?

With a proprietary reverse mortgage, the lender pays you instead of the reverse. Your balance grows over time and your home equity decreases as interest and fees are added each month.

Repayment generally is due once you no longer live in the home as your primary residence.

Payout options

Depending on your lender, you can typically receive proceeds as:

• A lump sum payment
• A series of regular payments
• A line of credit
• Some combination of the above

When the loan must be repaid

Your loan generally becomes due when you sell your home, move out, or die. Heirs may repay the loan or refinance into a traditional mortgage to keep the home, or the lender may sell the property to retire the balance.

What borrowers still must pay

You’re still responsible for property taxes, homeowners insurance, and home maintenance. Falling behind on these can put your loan into default.

Requirements for a proprietary reverse mortgage

Because proprietary reverse mortgages aren’t federally insured, lenders set their own reverse mortgage requirements, though most share a few baseline expectations.

Minimum age

Age minimums vary by lender and state. Some accept borrowers 55 or older, while others set the minimum closer to the age of 62 required for an HECM.

Equity and property requirements

Most lenders expect you to have significant home equity, often at or above 50%, and primary-residence occupancy. Because these loans don’t have to meet FHA property standards, lenders may offer more flexibility on property type, including some condos that wouldn’t qualify for a HECM.

You can estimate your equity with the home equity calculator from Rocket Mortgage.

Credit, debt, and income review

Lenders don’t apply a set debt-to-income ratio (DTI) requirement. Instead, they review your payment history and confirm you’ll have enough income to cover taxes, insurance, and maintenance.

How much can you borrow with a proprietary reverse mortgage?

A proprietary reverse mortgage typically allows you to borrow more than you can with an HECM.

HECM loan limits vs. proprietary loan limits

The FHA sets an HECM loan limit every year. For 2026, that’s $1,249,125, up from $1,209,750 in 2025.

Proprietary reverse mortgages aren’t bound by this cap, so high-value homeowners can borrow more. The ceiling depends on the lender, the home’s fair market value, and your equity.

Some lenders market amounts well into the millions for high-value homes, but each sets its own ceiling, so request estimates from more than one company.

Why borrowing costs can grow over time

Because you're not making payments that reduce your balance, interest compounds, and the amount you owe over time goes up, not down.

Proprietary reverse mortgage vs. HECM

Here are the key differences between proprietary reverse mortgages and HECMs:

• Backing and insurance. HECMs are FHA-insured, which requires up-front and ongoing mortgage insurance premiums (MIP). Proprietary loans are backed only by the private lender and typically skip that premium.
• Age minimum. HECMs require borrowers to be 62 or older. Proprietary loans may allow borrowers age 55 and older, depending on the lender.
• Borrowing limits. HECMs cap out at $1,249,125 in 2026. Proprietary loans aren’t bound by this limit.
• Rates. Proprietary loans often carry higher mortgage rates, since lenders take on more risk without federal insurance.
• Protections. HECM borrowers get FHA-mandated safeguards. Proprietary borrowers should confirm protections, including any nonrecourse clause, directly with the lender.

Types of reverse mortgages

There are three main types of reverse mortgages.

Home equity conversion mortgages

HECMs are the most common type of reverse mortgage. They’re FHA-insured, though that insurance protects the lender rather than the homeowner, and proceeds can be used for any purpose.

Proprietary reverse mortgages

Proprietary reverse mortgages are private loans not backed by the federal government, typically designed for homeowners with higher-value homes.

Single-purpose reverse mortgages

Some state and local agencies and nonprofits offer single-purpose reverse mortgages. They cost less but can only be used for a specific purpose, such as home repairs or property taxes.

Who are proprietary reverse mortgages for?

Proprietary reverse mortgages are for:

• Homeowners who want to borrow more than the 2026 HECM limit of $1,249,125
• Homeowners with substantial equity, generally at least 50%, who need cash flow to stay in their homes
• Homeowners who want more flexibility on property type, such as certain condos that don’t meet FHA guidelines
• Homeowners who want to avoid the up-front MIP required for an HECM

Proprietary reverse mortgage pros and cons

It’s important to weigh proprietary reverse mortgage drawbacks and advantages.

Benefits of proprietary reverse mortgages

• Higher borrowing potential for high-value homes
• Funds can be used for any purpose
• No up-front MIP
• No monthly principal or interest payments required

Risks and drawbacks of proprietary reverse mortgages

• Often higher interest rates than HECMs
• Fewer standardized consumer protections, since there’s no FHA insurance backing the loan
• Equity can be used up faster, since interest compounds on a growing balance.
• Ongoing obligations for property taxes, insurance, and maintenance remain your responsibility.
• Risk of mortgage fraud from high-pressure sales tactics

Are proprietary reverse mortgages nonrecourse loans?

Most reverse mortgages, including many proprietary ones, include a nonrecourse clause, meaning you or your estate won’t owe more than your home’s value when the loan comes due. Since proprietary loans aren’t federally insured, this protection comes from the lender’s contract, so confirm it’s included before you sign.

Proprietary reverse mortgage costs, fees, and borrowing example

Learn more about the specific costs of a proprietary reverse mortgage.

Mortgage insurance and closing costs

Because proprietary reverse mortgages aren’t FHA-insured, you generally won’t pay an up-front MIP. You may still owe closing costs, origination fees, and other charges that vary by lender, so ask for an itemized breakdown.

Interest rates

Rates for proprietary reverse mortgages often run higher than HECM rates, since lenders take on more risk without federal insurance, according to the FTC. Ask whether your rate is fixed or variable, since variable interest rates can increase what you owe over time.

Proprietary reverse mortgage example

Say you own a home appraised at $2 million with $1.5 million in equity after paying off your mortgage. A proprietary reverse mortgage could let you access equity beyond the HECM’s 2026 limit of $1,249,125, potentially paying off your existing mortgage and receiving the remainder as a lump sum, monthly payments, or a line of credit.

How to shop for a proprietary reverse mortgage

Here’s how to find a proprietary reverse mortgage that fits your budget.

Compare lenders and loan terms

Rates, origination fees, closing costs, and payout options vary by lender, so request detailed cost breakdowns from more than one lender before deciding.

Talk with a HUD-approved housing counselor

Many proprietary reverse mortgage lenders require independent counseling, similar to the HECM requirement. Find a counselor through HUD’s housing counselor search.

Watch for reverse mortgage fraud

Take your time, resist pressure to buy additional financial products with your proceeds, and verify your lender is legitimate. If you suspect you’ve been targeted by a reverse mortgage scam, report it to the Federal Trade Commission or Consumer Finance Protection Bureau.

Alternatives to proprietary reverse mortgages

Here are a few alternatives to a reverse mortgage worth considering.

Home equity loan

A Home Equity Loan from Rocket Mortgage lets you borrow a portion of your equity as a lump sum.¹

HELOC

A home equity line of credit (HELOC) lets you borrow against your equity as needed, typically at a lower rate than a proprietary reverse mortgage, though you’ll make monthly payments. Rocket Mortgage currently doesn’t offer HELOCs.

Personal loan

An unsecured personal loan lets you borrow without putting your home up as collateral, though rates tend to be higher.

Cash-out refinance

A cash-out refinance replaces your existing mortgage with a larger one and gives you the difference in cash.² Unlike a reverse mortgage, you’ll make monthly payments on the new loan.

FAQ

Here are answers to common questions about proprietary reverse mortgages.

What are the three types of reverse mortgages?

HECMs, proprietary reverse mortgages, and single-purpose reverse mortgages.

What is the dark side of a reverse mortgage?

Your debt grows, and equity shrinks over time; you could leave less to your heirs, and fees and rates can make it expensive, according to the FTC. Proprietary reverse mortgages carry the added risk of fewer standardized protections since they aren't FHA-insured.

What does Dave Ramsey say about a reverse mortgage?

Some financial commentators caution against reverse mortgages generally, citing high fees and the risk of eroding equity you might otherwise leave to heirs. Weigh those concerns against your own goals and talk with a HUD-approved counselor before deciding.

What is a better alternative to a reverse mortgage?

It depends on your goals. A HELOC, personal loan, cash-out refinance, or downsizing may fit better than a reverse mortgage, depending on how much cash you need and whether you’re comfortable with monthly payments.

Are there restrictions on how you can use the money from a reverse mortgage?

No. Proprietary reverse mortgage and HECM proceeds can generally be used for any purpose. Only a single-purpose reverse mortgage restricts how funds can be spent.

Can I take out a reverse mortgage if I have an existing mortgage on my home?

Yes. Part of your proceeds typically pays off your existing mortgage first, and you can use the remainder for anything you like.

The bottom line on proprietary reverse mortgages

A proprietary reverse mortgage can help homeowners with high-value properties borrow more equity than a federally insured HECM allows, without a monthly payment. That flexibility comes with trade-offs, including higher rates and fewer protections, so compare lenders and talk with a HUD-approved housing counselor before deciding.

Rocket Mortgage doesn’t offer reverse mortgages, but we’re here to help you explore your borrowing options.

¹ Home Equity Loan Product is a second standalone lien and may not be used for piggyback transactions. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Not available on Ameriprise products. Additional restrictions, terms, and conditions apply. Must meet qualification requirements. This is not a commitment to lend.

² Refinancing may increase finance charges over the life of the loan.