Proprietary Reverse Mortgages have lower closing costs and higher proceeds. They also have a 55-year-old product offered in Tennessee, Mississippi, Georgia, and in Alabama. These proprietary products are a great way to get a condominium done quickly.

What is a Proprietary Reverse Mortgage?

A proprietary reverse mortgage is a private, non-government-insured loan designed for homeowners aged 55+ to convert home equity into cash without monthly repayments. Unlike HECMs (federally backed), Reverse Mortgages are for those aged 62. (https://www.consumerfinance.gov/language/cfpb-in-english/reverse-mortgages-key-terms/), these are funded by private lenders, offering higher borrowing limits—often for homes valued above the $1,249,125M+ FHA limit—with fewer property restrictions.

Key Features of Proprietary Reverse Mortgages

  • High-Value Properties: Primarily used for homes that exceed the FHA loan limit (e.g., above $1,249,125), providing access to "jumbo" reverse mortgage amounts.
  • No FHA Insurance: They are not insured by the HUD/FHA, meaning they do not require upfront mortgage insurance premiums (MIP), which can lower closing costs.
  • Flexible Qualifications: They may allow for non-FHA-approved condominiums or higher loan-to-value ratios.
  • Non-Recourse Feature: Despite being private, they usually remain non-recourse loans, meaning the borrower or their heirs will not owe more than the home’s value upon sale.
  • Speed: Due to less bureaucracy, they may close faster than HECM loans.

Risks and Considerations

  • Higher Interest Rates: Because they lack federal backing, interest rates on proprietary loans may be higher than on HECMs.
  • No FHA Guarantee: If the lender fails, the government does not guarantee the loan's repayment or terms.
  • Not Available Everywhere: These products are not available in all states and vary by lender.
  • Variable Terms: Terms are set by individual lenders, not by HUD, meaning they lack the strict standardization of the HECM program.

When to Consider a Proprietary Loan. These loans are best suited for homeowners with expensive homes, those seeking a larger lump sum, or those with unique property types that do not qualify for HECMs. These also have differing qualifications, such as you can qualify by being age 55 in Alabama,  Mississippi, Tennessee, and Georgia.

  • Alabama has a minimum home value of $450,000. * There is no way to pass a debt to your hiers just like an FHA Reverse Mortgage.