Single-Purpose Reverse Mortgages Allow Borrowers to Pay For Specific, Lender-Approved Expenses
The most common kind of reverse mortgage on the market is the HECM, or Home Equity Conversion Mortgage, which is tightly regulated and insured by the FHA. However, there are other kinds of reverse mortgages out there, including both proprietary reverse mortgages and single-purpose reverse mortgages. Unlike HECMs, single-purpose reverse mortgages are not insured by the FHA, and, unlike both HECMs and proprietary reverse mortgages, they cannot be used for any purpose the borrower wants. Instead, funds from single-purpose reverse mortgages need to be used for one, specific, lender-approved expense. In most cases, this is paying off property taxes or making necessary home renovations.
Who Offers Single-Purpose Reverse Mortgages?
Unlike other kinds of reverse mortgages, single-purpose reverse mortgages are not offered by private lenders. Instead, they are offered by state and local government organizations, as well as non-profits. To qualify, borrowers typically need to have a low to moderate income, and must also meet a variety of individual requirements, which vary based on the exact organization and the particular reverse mortgage product in question.