What Is A Jumbo Reverse Mortgage and How Does it Work?

May 25

Whatever stage of your life, you have a lengthy list of things you'd like to finish before retiring or settling in your retirement years. But how do you make money?

The rising popularity of FHA Home Equity Conversion Mortgages (HECMs) is a popular way to access the equity that accumulates over time. The maximum amount of these loans are regulated by the Federal Housing Administration. The amount you receive from your loan could be higher. If your house is worth above average, could you get a loan?

How much can you borrow in a reverse-jumbo mortgage?

Homes worth more than $400,000 can use a jumbo reverse mortgage, also known as a "proprietary" or "private" reverse mortgage, to tap into the equity of their properties that is higher than what is permitted under FHA's HECM lending guidelines. You can keep your full title and ownership of your home by using the jumbo reverse mortgage similar to a HECM. It is possible to make a monthly mortgage payment or not. You are free to choose which way to spend the loan's proceeds. Rather than being offered by a national network of lenders, jumbo reverse mortgages are designed and offered by local banks and credit unions. To access more significant equity, the limits of jumbo reverse mortgages are larger.

Jumbo reverse mortgages are an option for those with a significant equity value within your house. A jumbo reverse mortgage can be an excellent option for four reasons.

1. More Money To Spend

The most significant benefit you can get from the jumbo reverse mortgage is that it has more money to spend. Contrary to traditional FHA reverse mortgages, jumbo reverse mortgages allow you to access significantly more than the potential amount (currently $822,375 by 2021). For example, the Longbridge Platinum mortgage gives you access to up to $4 million of funds.

Another way to look at it is that a more expensive house typically means more cash in the bank. Jumbo reverse mortgage loan restrictions are more strict than FHA lending limitations, so you will get more equity from your home. Additionally, jumbo reverse mortgages might allow you to quickly access the total amount of the loan proceeds.

2. Refinance Larger Balances

Reverse mortgages allow borrowing money to pay off higher mortgage balances. And what's the most prevalent reason that causes American homeowners to take on debt? It is mortgages. The mortgage balance reached $10.04 trillion in the fourth quarter of 2020.

It is possible to refinance minor mortgages by using an FHA HECM. However, the jumbo reverse loan can be used to refinance bigger balances. This is a fantastic option if you live in an area where living expenses are expensive.

3. Lower Closing Fees

If you're considering a reverse mortgage, you're probably aware of the expenses and charges associated with the loan. There are no mortgage insurance costs. Go through our blog if you require an update on the basics. In addition to the reverse mortgage closing fees and closing costs, borrowers are also responsible for mortgage insurance premiums, including initial and annual payments. The Department of Housing and Urban Development (HUD) requires this mortgage insurance on all loans HECM to protect the borrower and their heirs.

Jumbo reverse mortgage lenders California do not require FHA insurance. This means there are no upfront costs or annual insurance premiums. Jumbo reverse mortgages tend to be less expensive than standard FHA HECMs. This makes them a more attractive and cost-effective option for those who don't need to pay an excessive amount but still desire the benefits of reverse mortgages.

4. Strong Protections For Borrowers

In addition to the previous, because the Federal Housing Administration does not cover jumbo reverse mortgages, there are no mortgage insurance fees. Even though they don't have to be insured, these loans provide excellent protection for borrowers. Non-recourse protection is a common feature of a lot of jumbo reverse mortgages. This is not uncommon. A non-recourse loan protects your heirs of yours and you from being liable to the lender for more than the home is worth when it is sold.

While jumbo loans can provide borrowers protection, they're not always assured. Be sure to ask your lender regarding the specific borrower protections they give in case you're planning to get a jumbo reverse mortgage.