A single-purpose reverse mortgage is designed for seniors who want to use their home equity to cover one specific, pre-approved expense. Unlike more flexible reverse mortgages, such as the Home Equity Conversion Mortgage (HECM), this loan is typically offered by state or local government agencies or nonprofit organizations. These lenders restrict use of the funds strictly to the approved purpose, which commonly includes essential home repairs, property taxes, or necessary modifications to maintain safe and accessible living conditions.

To qualify, borrowers must be at least 62 years old, live in the home as their primary residence, and either own their home outright or have a small remaining mortgage balance. The loan does not require monthly payments and is usually repaid only when the borrower sells the home, moves out permanently, or dies. This can make it especially appealing for seniors on fixed incomes who need financial help with a specific cost but want to avoid monthly loan payments.

Compared to HECM reverse mortgages, single-purpose reverse mortgages have much lower upfront fees and closing costs, making them the most affordable reverse mortgage option. However, they are less widely available and only offered in certain areas. Because the funds are disbursed for a specific purpose, the loan helps prevent misuse of money and ensures it addresses critical needs.

Common approved purposes include repairing or replacing a heating system, making home accessibility modifications, or paying overdue property taxes to avoid foreclosure. Unlike traditional home equity loans or lines of credit (HELOCs), single-purpose reverse mortgages do not require monthly payments, providing a financial alternative for qualifying seniors.

A frequent misconception is that the lender will take ownership of your home. In reality, the homeowner retains the title, and the loan is secured by a lien. Heirs may repay the debt by selling the property if they wish to keep it.

For those interested, local Area Agencies on Aging or HUD-approved housing counseling agencies can provide information and assistance to locate available programs.

For more on reverse mortgages and related terms, see our Reverse Mortgage and Reverse Mortgage Counseling Requirement pages. You can also learn about home equity loans and lines of credit for broader financing options.

Sources:

  • Consumer Financial Protection Bureau, “What are the different types of reverse mortgage loans?” (consumerfinance.gov)
  • U.S. Department of Housing and Urban Development (HUD), “Reverse Mortgages” (hud.gov)
  • NerdWallet, “Reverse Mortgage: How It Works and Who It’s For” (nerdwallet.com)