Older adults over the age of 62 who are homeowners sometimes need a substantial amount…
Are you worried that a traditional reverse mortgage loan won’t get you the right value for your home? Then it would be best if you considered a jumbo reverse mortgage, a specialized program designed for high-value homeowners.
If you own a high-value home and want to get a reverse mortgage, you may not get the most value from a traditional Home Equity Conversion Mortgage (HECM) reverse mortgage. That’s where jumbo reverse mortgages come in.
Read on to learn how jumbo reverse mortgages work and whether they are the right product for you or not.
What Are Jumbo Reverse Mortgages?
In the past, with reverse mortgages, you could only access some of your home equity through the government-backed Home Equity Conversion Mortgage (HECM) program, with a $726,525 lending limit. Some individuals benefited from this reverse mortgage, even when their properties were valued at over one million dollars. However, with this program, property owners with higher-value properties couldn’t get any more money out of their home, even though their home value was much greater.
Luckily, the mortgage industry has since evolved. Today, we have jumbo reverse mortgages that serve high-value homeowners who may be looking for something a little different than a HECM; this could mean higher lending limits, terms that better suit their situation, and/or no upfront mortgage insurance payment at closing, all while still having the payment optionality feature that a HECM has. Private lenders offer jumbo reverse mortgages; loans that hold the same non-recourse safeguards as the HECM loans and have no required monthly mortgage payment,* but also open up possibilities with higher lending limits and no required mortgage insurance payments.
Under a jumbo reverse mortgage program, you can borrow more than the FHA’s Home Equity Conversion Mortgage (HECM) loan limits. As of 2022, the maximum claim amount (MCA) for the HECM loans is $970,800.
If you are a senior age 62 or older and living in a high-value property with significant equity, you could get as much as $4 million under a jumbo reverse mortgage program like the Smartfi Choice. You can use the funds for various expenses, such as medical, or to replace a traditional home loan with a product that does not require monthly mortgage payments.
While jumbo loans share many similarities with government-backed reverse mortgages, you need to understand the differences to ensure they are suitable for your financial needs.
Jumbo Reverse Mortgage Definition
Jumbo reverse mortgages are often defined as “proprietary” reverse mortgage loans. These mortgage loans come from private lenders, so they are not subject to the strict government regulations that HECMs are subject to. Financial institution’s may have their own unique version of jumbo reverse mortgage loans with distinct requirements for cost, loan limits, interest rates, and other factors.
On the other hand, the Department of Housing and Urban Development (HUD) regulates HECMs and the Federal Housing Administration (FHA) provides insurance for those conventional reverse mortgages. Qualified homeowners can convert a part of their home equity into loan proceeds.
A HECM loan can save you the stress of making required monthly mortgage payments* to offset the principal loan balance and the accrued interest, whether on variable or fixed-rate loans. The loan will become due upon reaching a qualified event, such as when you sell the home or move out.
However, the HECM reverse mortgage requires you to pay for the initial and regular mortgage insurance. The insurance payments help reduce the risk for reverse mortgage lenders. If you default, the insurance will cover the lender’s losses up to the current MCA.
Unlike the traditional reverse mortgages, jumbo loans do not have FHA insurance. Therefore, the HUD maximum lending limit of $970,800, as of 2022, does not apply to them. Jumbo reverse mortgages have higher loan limits, allowing property owners to access more equity in high-value properties, exceeding the limit set for HECM loans.
If you own a high-value home, you can enjoy similar benefits as those with HECM products without the government-imposed loan limit, mortgage insurance premium, or other related costs. Keep in mind, property taxes will still apply.
If you are considering a proprietary reverse mortgage loan, you need to ask about the specific terms that your mortgage lender offers, such as:
- The maximum loan amount available to you
- How you obtain loan proceeds
- Non-borrower protections that the lender offers
Jumbo Reverse Mortgage Requirements
Typically, separate reverse mortgage lenders have different requirements, since no government agency oversees these loans. Smartfi Home Loans, LLC has the following primary requirements for the Choice jumbo reverse mortgage:
- Age: You must be aged 60** years and above to qualify for a Choice jumbo loan.
- Home equity: You should own at least 50% of your home’s equity to be eligible for a jumbo reverse mortgage product.
- Primary residence: You must live in the property as the primary residence to qualify for a jumbo loan. Rental properties and vacation homes do not qualify for jumbo programs.
There may be several jumbo reverse mortgage options available to you. Therefore, the first step to getting a credit loan is to consult with an experienced reverse mortgage specialist about your options, like a Smartfi Specialist at Smartfi Home Loans, LLC. Our friendly mortgage experts are always ready to help you through the lending process and ensure you get the product that best suits your financial needs.
Who Is Eligible for a Jumbo Reverse Mortgage?
We’ve already observed that the eligibility for a jumbo reverse mortgage will depend on the mortgage lender. However, common requirements include the borrower being at least 62 years old, owning over 50% of their home’s equity, and living in the property as their primary residence.
You may find a jumbo reverse mortgage helpful if:
- You need to pay off your existing mortgage balance. If you have a mortgage balance and cannot afford the payment due to financial issues, you can pay it off using a jumbo reverse mortgage and eliminate the required monthly mortgage payments.*
- You need additional funds to meet some retirement needs. Whether you want to supplement your retirement account or plan for assisted living, jumbo reverse mortgage funding can provide the much-needed retirement safety net.
- You need to remodel your property to accommodate your age and health needs. You can use funds from proprietary reverse mortgages to improve your home to ensure your safety and comfort as you grow older.
- You are familiar with the protections your lender offers. Most reverse mortgages offer protections to ensure borrowers do not pay the difference of their loan balance and home value if their loan balance surpasses their home value. These protections may also allow a non-borrowing spouse to live in the property after the borrower passes, provided they maintain it and pay property taxes and homeowners insurance.
While proprietary reverse mortgage programs often provide protections like FHA-insured reverse mortgages, you should ask your mortgage provider to confirm their conditions.
Jumbo Reverse Mortgage FAQs
What is the difference between a jumbo reverse mortgage and a traditional reverse mortgage?
Jumbo reverse mortgages are offered by private lenders, as opposed to being an FHA-backed and HUD-regulated product like a HECM. They have higher lending limits than a traditional reverse mortgage and may have different requirements and features to help borrower’s whose needs may not fit a traditional reverse mortgage.
Are there limitations on how to use your jumbo loan funds?
Once you receive your lump-sum jumbo reverse mortgage funds, you can spend them on any retirement needs, including paying for medical expenses, supplementing your cash flow, or going on a vacation. You may also use some of the funds on renovation and remodeling projects to improve your home value.
How does one become eligible for a jumbo reverse mortgage?
Depending on your lender, you need to meet several requirements to be eligible for a jumbo loan. The primary requirements for most jumbo reverse mortgages include:
- Being aged 62 years or older (age 60** with Smartfi Choice)
- Owning a considerable portion of your home equity, usually at least 50%
- Living in the property as your main residence
Your mortgage provider will advise on specific requirements and the loan documents you need to provide to be eligible for a loan.
Can I get a jumbo loan line of credit?
It is possible to receive a jumbo loan line of credit. There were two notable improvements on jumbo mortgage loans in 2021. These improvements include two options: higher loan limits and the freedom to use available loan proceeds as an open-end line of credit. Initially, regulators only allowed lenders to disburse one lump sum on proprietary reverse mortgages.
What property types qualify for a reverse mortgage?
Various properties qualify for reverse mortgages according to the new FHA regulations. However, the eligibility criteria for proprietary reverse mortgages under private programs may differ from the FHA-backed HECM loans. You might want to consult a reverse mortgage specialist to determine if your property qualifies for a jumbo reverse mortgage.
What interest rate should I expect to pay on jumbo reverse mortgages?
Several factors determine the interest rates in jumbo reverse mortgage programs, including:
- The loan amount
- Current interest rates
- Your home equity
- Your financial status
Smartfi Home Loans, LLC offers some of the most competitive interest rates in the mortgage banking industry. To determine the interest rate you might get on your loan , don’t hesitate to contact a Smartfi Specialist for a quote by calling (877) 816-6706 or submitting an online request.
Talk to a Reverse Mortgage Specialist Today
Are you considering a jumbo reverse mortgage loan or are unsure whether your property is eligible for a jumbo loan?
Then you should contact us at Smartfi Home Loans, LLC online or by calling (877) 816-6706 to speak with a Smartfi Specialist. At Smartfi Home Loans, LLC, we understand what your home means to you. So, we remain committed to ensuring you have the best mortgage experience. We have the knowledge and expertise to ensure you get a jumbo reverse mortgage that suits your needs at the most competitive interest rate.