Jumbo (Proprietary) Reverse Mortgage

Jumbo Reverse Mortgage

Is your client worried that a traditional reverse mortgage loan won’t get them the right value for their home? Then it would be best if they considered a jumbo reverse mortgage (often times also called a proprietary reverse mortgage or non-FHA reverse mortgage) a specialized program designed for high-value homeowners. 

If they own a high-value home and want to get a reverse mortgage, they 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 your client or not.

What Are They?

In the past, with reverse mortgages, the borrower could only access some of their home equity through the government-backed Home Equity Conversion Mortgage (HECM) program, which up until 2023, was under one million dollars. 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, or proprietary reverse mortgages like Smartfi^® Choice, 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, homeowners can borrow more than the FHA’s Home Equity Conversion Mortgage (HECM) loan limits. As of 2024, the maximum claim amount (MCA) for the HECM loans is $1,149,825. 

If your client is a senior age 62 or older and living in a high-value property with significant equity, they could get as much as $4 million under a jumbo reverse mortgage program like the Smartfi Choice. They 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, your client needs to understand the differences to ensure they are suitable for their financial needs. 

Jumbo Reverse Mortgage Definition

Jumbo reverse mortgages are often called “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 your client 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 they sell the home or move out. 

However, the HECM reverse mortgage requires the borrower to pay for the initial and regular mortgage insurance. The insurance payments help reduce the risk for reverse mortgage lenders. If they 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 $1,149,825, as of 2024, 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 your client owns a high-value home, they 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 your client is considering a proprietary reverse mortgage loan, they should know about the specific terms offered, such as: 

• The maximum loan amount available to them 
• How they obtain loan proceeds 
• Non-borrower protections that the lender offers 

General Loan Requirements

Typically, separate reverse mortgage lenders have different requirements, since no government agency oversees these loans. Smartfi Home Loans has the following primary requirements for the Choice jumbo reverse mortgage: 

• Age: Borrower must be aged 60** years and above to qualify for a Choice jumbo loan. 
• Home equity: Borrower should own at least 50% of their home’s equity to be eligible for a jumbo reverse mortgage product. 
• Primary residence: Borrower 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 your client. If you have a borrower who may benefit from a jumbo reverse mortgage, your Account Executive is always ready to help you run scenarios and get them the product that best suits their 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. 

Homeowners may find a jumbo reverse mortgage helpful if: 

• They need to pay off their existing mortgage balance. If they have a mortgage balance and cannot afford the payment due to financial issues, they can pay it off using a jumbo reverse mortgage and eliminate their required monthly mortgage payments.* 
• They need additional funds to meet some retirement needs. Whether they want to supplement their retirement account or plan for assisted living, jumbo reverse mortgage funding can provide the much-needed retirement safety net. 
• They need to remodel their property to accommodate their age and health needs. They can use funds from proprietary reverse mortgages to improve their home to ensure their safety and comfort as they grow older. 
• They are familiar with the protections their 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 always confirm with the lender what protections are made available to your client.  

Product 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 jumbo loan funds?

Once the borrower receives their lump-sum jumbo reverse mortgage funds, they can spend them on any retirement needs, including paying for medical expenses, supplementing their cash flow, or going on a vacation. They may also use some of the funds on renovation and remodeling projects to improve their home value. 

How does one become eligible for a jumbo reverse mortgage?

Depending on the borrower’s lender, they 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 home equity, usually at least 50% 
• Living in the property as the main residence 

The borrower’s mortgage provider will advise on specific requirements and the loan documents they need to provide to be eligible for a loan. 

Is it possible to 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 included: 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 a proprietary reverse mortgage. 

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 a proprietary reverse mortgage, under private programs, may differ from the FHA-backed HECM loans. You should consult your Account Executive or the Choice lending guidelines to determine if their property qualifies for a Smartfi’s jumbo reverse mortgage. 

What interest rate should my client be expected to pay on jumbo reverse mortgages?

Several factors determine the interest rates in jumbo reverse mortgage programs, including: 

• The loan amount 
• Current interest rates 
• Borrower’s home equity 
• Their financial status 

Smartfi Home Loans offers some of the most competitive interest rates in the mortgage banking industry. To determine the interest rate they might get on their loan, you can run a quick quote in the Partner Portal or reach out to your Account Executive and they can run the numbers for you. If you aren’t a Smartfi partner yet, you can get started today with this short form. 

Talk to a Reverse Mortgage Specialist Today

Is your client considering a jumbo reverse mortgage loan or are they unsure whether their property is eligible for a jumbo loan? Then you should run a quick quote or contact your Smartfi Account Executive today. Our team has the knowledge and expertise to ensure you get your client the jumbo reverse mortgage that suits their needs at the most competitive interest rate. 

Contact us at (877) 816-6706 or complete the Partner with Us form to start offering jumbo reverse mortgage loans today.