Proprietary reverse mortgage: What to know

A reverse mortgage allows older homeowners to turn their hard-earned equity into cash they can use to pay expenses and stay in their homes. Most reverse mortgages are home equity conversion mortgages that conform to Federal Housing Administration rules limiting how much you can borrow. If you own a high-value home and want to borrow more than that limit, a proprietary reverse mortgage may be the answer.

While Rocket^® doesn’t offer reverse mortgages, we can help you learn more about them as you explore your options.

What is a proprietary reverse mortgage?

A proprietary reverse mortgage lets older homeowners convert equity into cash. Instead of making payments and reducing the balance you owe on your home, the lender pays you and your mortgage balance increases.

Proprietary reverse mortgages are offered by private lenders and are not backed or insured by the government. They also don’t have to meet FHA requirements for home equity conversion mortgages, which limit the amount you can borrow and are available only to borrowers 62 and older.

How do proprietary reverse mortgages work?

A reverse mortgage is designed to help older homeowners who may be equity rich and cash poor borrow their equity so they can afford to stay in their homes. Most reverse mortgages are home equity conversion mortgages, which are insured by the FHA and have specific requirements. Proprietary reverse mortgages are offered by private lenders without FHA insurance and usually are for borrowers whose homes are high value.

Unlike an HECM, proprietary reverse mortgages have no borrowing limit. It’s possible to borrow as much as $4 million with a proprietary reverse mortgage. Less regulation and more risk for the lender usually translates into higher interest rates for proprietary reverse mortgages.

Most reverse mortgage borrowers have at least 50% equity in their home and are old enough to be near retirement age. While HECMs require borrowers be at least 62 years old, proprietary reverse mortgages set their own minimum age and it’s possible to get one at age 55.

When the reverse mortgage is funded, the borrower’s current mortgage, if any, is paid off and the remainder paid to the borrower in several possible ways:

• A lump sum payment
• A series of regular payments
• A line of credit
• Any combination thereof.

Borrowers must pay property taxes and their homeowners insurance premiums, and they must continue to maintain the property.

Where a reverse mortgage differs from, say, a cash-out refinance is that it doesn’t need to be repaid until the borrower no longer lives in the home. This can be because they’ve sold it, moved out or died. Interest on the loan’s balance will be charged until the loan is repaid.

In most cases, the home is sold with the proceeds used to pay the reverse mortgage. The borrower’s heirs, however, may refinance the home into a traditional mortgage if they wish to keep it.

Requirements for a proprietary reverse mortgage

While lenders are free to set their own requirements for proprietary reverse mortgages, you can expect you’ll need to meet the following general requirements:

• Age. Lenders set this requirement. Many will accept borrowers who are at least 55, depending on your state. Others will require you be at least 62.
• Equity. You usually need at least 50% home equity in your property to qualify for the loan. 
• Residence status. You must live in your home and use it as your primary residence to qualify for a reverse mortgage.
• Credit score. No minimum credit score is required, though lenders will look at your past payment history to consider financial eligibility.
• Debts and income. Does a proprietary reverse mortgage have a DTI requirement? No. When determining if you qualify for a reverse mortgage, lenders will look at how much money you have left after paying utilities, food, debts, etc., instead of your debt-to-income ratio.

Borrowing limits

Proprietary reverse mortgage borrowers can borrow more than the FHA’s HECM loan limit, which is $1,209,750 in 2025. At the same time, individual loan limits can also vary from lender to lender. On the bright side, select lenders may allow you to borrow up to $4 million of their equity.

When agreeing to a proprietary reverse mortgage, remember borrowing costs can add up faster than with a traditional mortgage. Since you’re not making a monthly payment that reduces your balance, interest can compound and increase the amount you owe over time.

Who are proprietary reverse mortgages for?

A proprietary reverse mortgage may be right for:

• Seniors with cash flow concerns. A proprietary reverse mortgage can make sense for older homeowners who need more cash to afford to pay their expenses and stay in their home.
• Seniors with significant home equity. Seniors with a lot of equity can use a proprietary reverse mortgage to get cash to pay their expenses.
• Seniors with high-value homes. If you’d like to borrow more than the HECM limit of $1,209,750, a proprietary mortgage can let you do that.
• Seniors who want to avoid mortgage insurance. If you want to avoid the mortgage insurance and mortgage origination fees that come with an HECM, a proprietary reverse mortgage allows that.

Pros and cons of proprietary reverse mortgages

It’s important to consider the pros and cons of a proprietary reverse mortgage.

Pros

• You can borrow more money: A proprietary reverse mortgage doesn’t have to conform to FHA loan limits, allowing you to borrow up to $4 million.
• Unlimited uses for funds: You can use the proceeds from a proprietary reverse mortgage any way you like. That includes paying for everyday expenses, home upgrades or renovations, travel, and more.
• No upfront mortgage insurance: You’re not required to pay mortgage insurance, which can save you thousands of dollars. For example: The upfront mortgage insurance fee charged for a HECM is typically around 2% of your home’s overall value. Not having to pay that fee on a $500,000 home could save you up to $10,000 right from the start.
• No monthly payment: You’re not required to repay a reverse mortgage until the borrower no longer lives in the home.

Cons

• High interest rates: Because proprietary loans are riskier for lenders, they charge higher interest rates. As of April 9, 2025, interest rates for an HECM range from 8.74% to 10.345%.
• Fewer financial protections: Proprietary reverse mortgages do not offer borrowers the same protections that an FHA-backed HECM does. Borrowers should proceed with caution before taking out large loan amounts and explore all the financial options available to them before applying for a proprietary reverse mortgage.
• Potential for fraud. Interested borrowers should take the time to research and verify their lender is legitimate, study the loan product and terms offered, and avoid making any decisions under duress. If you have questions, speak with a qualified financial advisor.
• Comes with ongoing obligations: Don’t forget that you must also continue to pay your property taxes and homeowners insurance.

Alternatives to proprietary reverse mortgages

A reverse mortgage isn’t the only way you can turn equity into cash.

• Home equity line of credit: A HELOC lets homeowners turn some of their equity into a line of credit that they can borrow from as needed.
• Personal loans: An unsecured personal loan lets you borrow money without risking your home, though usually with a higher interest rate.

FAQs about proprietary reverse mortgages

Here are answers to frequently asked questions about proprietary reverse mortgages.

Are proprietary reverse mortgages a good way to increase retirement income?

They can be, especially since you can borrow more than you can with an HECM. A proprietary reverse mortgage lets you turn your home equity into cash, which you can use for anything you like. The downside is you’re depleting your equity, which may leave you with less to leave your heirs.

Can anyone apply for a proprietary reverse mortgage?

Proprietary reverse mortgages are meant for seniors and people nearing retirement age. Lenders can set their own age minimum for a proprietary reverse mortgage, and it’s possible to get one if you’re at least 55.

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

No. You’re free to use funds that you’ve obtained however you see fit. How you use the funds is only restricted if you take out a single-purpose reverse mortgage.

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

The bottom line: Homeowners may borrow more with a proprietary reverse mortgage

A proprietary reverse mortgage lets you borrow equity from your high-value home and make no payments until you no longer live in it. You can use the money you borrow for anything you wish. For older homeowners, it offers a way to turn equity into cash and afford to continue to stay in your home. Interest rates may be higher, and more financial risk may be involved in taking out a proprietary reverse mortgage.

If you’re looking for ways to supplement your retirement income or fund a home project, you’ll also want to consider other refinancing options through Rocket Mortgage® today as well.