The problem they solve
FHA calculates a HECM on your home's value or the lending limit, whichever is lower. A $2.5 million home is treated as though it were worth $1,249,125. Every dollar above the cap is invisible to the program.
Proprietary reverse mortgages — usually called jumbo reverse mortgages — are funded by private lenders with no FHA involvement and no cap. Some reach $4 million or more.
What you gain
- No lending limit, so high-value homes are valued at what they are worth.
- No mortgage insurance premium. No 2% upfront, no 0.5% annual. On a large loan that is a substantial saving — frequently the deciding factor.
- Age 55 on some programs, rather than 62. Availability varies by state and by lender.
- Some property types HECMs refuse, including certain non-FHA-approved condominiums.
- Faster, generally — no FHA case number, no HUD appraisal protocol.
What you give up
- The FHA guarantee. Non-recourse protection comes from the lender's contract rather than federal insurance. Most reputable programs are non-recourse — get it in writing and read it.
- The growing line of credit, usually. Most proprietary programs are lump sum or a fixed line. The compounding credit line is largely a HECM feature.
- Higher interest rates, typically. Private capital prices risk, and there is no government backstop.
- Lower loan-to-value ratios at younger ages. A 55-year-old may access a much smaller share than the age alone suggests.
- Program stability. Proprietary products come and go with the credit markets. Several vanished in 2008 and again in 2020.
Price both. Always.
The crossover point is not where people assume. Between roughly $1.2M and $1.8M in value, a HECM and a jumbo can produce surprisingly similar proceeds — and the HECM comes with FHA insurance, the growing line of credit and the guarantee that it cannot be frozen. Above about $2M the jumbo usually wins on raw dollars. Below the FHA limit, a jumbo can still occasionally win purely on the absence of the 2% premium. There is no rule of thumb that survives contact with a real file; run both.
Who these actually suit
- Homeowners well above the FHA limit who want meaningful proceeds.
- Borrowers aged 55 to 61 with substantial equity who cannot wait for 62.
- Owners of non-FHA-approvable condominiums.
- Borrowers who want to avoid mortgage insurance and do not need a growing line of credit.
Questions to ask any jumbo lender
- Is this loan non-recourse, and where does the note say so?
- What happens to my line of credit if you stop originating, or go out of business?
- Is there a growing line of credit feature, or a fixed one?
- What is the margin, and what is the expected rate today?
- What are the exact obligations that could put me in default?
- Does a non-borrowing spouse have the same protection they would have under a HECM?
That last one deserves particular attention. HECM non-borrowing spouse protections are federal. On a proprietary loan they are whatever the contract says — sometimes equivalent, sometimes not.
What this estimate is, and what it is not
These figures are an illustration for planning only — not a loan offer, not a commitment to lend, and not a guarantee of what you will receive. Your real numbers depend on a completed appraisal, the expected interest rate on the day your FHA case number is assigned, your existing mortgage payoff, and a HUD financial assessment. A reverse mortgage is a loan that must be repaid, not a government benefit. You remain responsible for property taxes, homeowners insurance and upkeep, and the loan can become due if you stop meeting those obligations.