Overwhelmingly, older Americans want to remain in their homes.
According to The American College of Financial Services’ Home Equity and Retirement Income Planning Survey, 83% of older homeowners (ages 55-75) would like to remain in their current home as long as possible.
Jamie Hopkins, Co-Director of The American College of Financial Services’ New York Life Center for Retirement Income Planning, says that the main takeaway of this survey should be that “advisors and consumers need to start thinking about home equity, including reverse mortgages, as part of the retirement income planning process.”
Despite this strong desire to “age in place,” only 14% said they’d considered a reverse mortgage, and only 30% earned a passing grade on basic knowledge about this potentially useful financial tool.
Today’s “jumbo” reverse mortgage products offer seniors low-cost options with an available line of credit. Designed for those age 62 and older with high-value homes or condos that don’t qualify for a standard Home Equity Conversion Mortgage (HECM) reverse mortgage, jumbo reverse mortgages let borrowers access more of their home equity than a HECM—up to $4,000,000, depending on the value of the home and other factors.
Jumbo reverse mortgages, such as Longbridge Platinum, also offer a choice of payout options to help seniors meet their financial goals. There’s a Fixed-Rate Program for those looking for a full-draw loan at a low, fixed rate; or a Line of Credit Program for seniors who want some upfront cash now and a reusable, growing line of credit for the future. These options could provide many seniors with the financial resources they need to stay in their homes.
Why do older Americans want to “age in place”? The answers probably won’t surprise you:
Independence. It may require a little help with home maintenance, or home-improvement upgrades to account for any limits in mobility, but people have a strong desire to keep control of their daily lives.
Community connections. Folks spend years building valuable relationships with friends, neighbors, and community organizations. In fact, friends and neighbors may provide just the help they need to remain at home and independent—and getting involved in their communities gives them a chance to help others, as well.
Routines and social interaction. People need both: studies show that daily tasks of self-care and home maintenance help with memory retention. And older adults who have frequent social contact exhibit 70% less cognitive decline than those who don’t.
Family. Once people go into an assisted-living facility or nursing home, family visits may be restricted to certain hours—and traditional gatherings often have to be altered or eliminated. A stable family dynamic provides comfort and familiarity for older adults dealing with the inevitable changes that come with aging.
However, staying home costs money. A recent AARP survey of adults age 50 and older found that 36% planned to modify their homes to enable them to remain there as they age. And while that may cost less than going to an assisted-living facility or a nursing home, renovating a home to fit the physical needs of an older homeowner can still be significant. For example, here are some average installation costs1 for common “aging in place” remodeling projects, from Retirement Living:
Bathroom Safety Remodel $14,000
Stair Lift Install $8,000
Entry Handrails $8,000
Walk-in Tub or Shower $5,000
Entrance Ramp $1,000+
Plus, services such as personal-care aides or housekeeping/landscaping companies are an ongoing expense. Where will the money come from? The answer could be right inside the home: a jumbo reverse mortgage lets high-value homeowners access their home equity for needed funds.
People with high-value homes they love—and want to continue living in—may consider asking their financial advisor about a jumbo reverse mortgage.
A jumbo reverse mortgage vs. a standard HECM.
Both types of loans allow older homeowners age 62 and older to convert a portion of their home equity into cash that they can use for any purpose—with no monthly mortgage payments required2.
Loan amounts increase over time, with payment due when the last borrower passes away or permanently leaves the home. As long as they meet their responsibilities—paying property taxes, homeowners insurance, and home maintenance costs—borrowers continue to own their home. Both loans involve financial counseling to ensure that it’s a good fit for the borrower.
How much borrowers can receive is based on how much home equity they have, the age of the youngest borrower on the loan, and current interest rates. In general, the more home equity they have and the older they are, the more they can receive.
But there are some important differences:
- A jumbo reverse mortgage allows homeowners to access more of their home’s equity than a standard HECM—up to $4M tax-free.3
- With a jumbo reverse mortgage, borrowers can receive 100% of the proceeds upfront.
- A jumbo reverse mortgage typically does not require mortgage insurance premiums.
- Interest rates for a jumbo reverse mortgage are typically higher than a traditional HECM.
- Unlike a standard HECM, a jumbo reverse mortgage is not insured by the Federal Housing Administration (FHA)—however, most lenders offer borrower protections similar to FHA guidelines. Homeowners considering a jumbo reverse mortgage should ask their lender how its policies compare.
A jumbo reverse mortgage vs. a standard Home Equity Line of Credit (HELOC).
Many senior homeowners choose a standard HELOC to access their home equity and improve their cash flow in retirement. Unfortunately, most never consider a jumbo reverse mortgage—which offers more flexibility as compared to a HELOC, and as a result may be an attractive alternative for many older adults. Here’s a closer comparison between a Longbridge Platinum jumbo reverse mortgage and a standard HELOC:
| PLATINUM LOC | STANDARD HELOC | |
|---|---|---|
| Ownership | Both types of loans allow you to own and keep the title of your home | |
| Payments | No monthly mortgage payments required1 | Requires monthly mortgage payments |
| Interest deduction | You can deduct the interest, if optional payments are made | You can deduct the interest |
| Line of credit growth | Reusable, growing line of credit— the unused portion can grow for 7 years3 | Line of credit does not grow over the life of the loan |
| Payoff and redraw | Access up to 75%4 of the Principal Limit during the first 10 years—with the ability to redraw repaid principal amounts | Can pay off and redraw during the first 10 years, but there may be a penalty |
| Rate adjustments | Every three months | Every month |
| Payback deadline | None, as long as you meet the terms of the loan and remain in your home | Typically comes due after 10 years |
| Prepayment penalty | No penalty for early repayment | Prepayment penalties can be charged in some cases—ask your lender |
| Non-recourse loan protection | You and your heirs aren’t personally liable if the loan amount exceeds the home value when it comes due | No such protection |
| Counseling | Independent, Platinum-approved counseling helps you fully understand your options | No independent counseling provided |
| Qualifications | Must be a homeowner age 60+* and use the home as your primary residence | Must qualify based on credit score and income |
Which jumbo reverse mortgage should you get? There are a wide range of options available. Make sure to shop around and ask the lender what the costs and fees would be. Longbridge Financial, LLC, offers Longbridge Platinum—an affordable jumbo reverse mortgage with a reusable, growing line of credit option. It offers the widest range of eligible home values, attractive low rates, and a streamlined approval process. It can be an attractive alternative to a standard HELOC, as there are no monthly mortgage payments required, as long as you meet the loan requirements.
Ask your financial advisor if a jumbo reverse mortgage could help you remain in your home. Taking a loan against your home is a big decision. Ask your trusted financial advisor if a jumbo reverse mortgage may be right for you to help pay off an existing mortgage, increase your cash flow, or help preserve your investment assets as part of your overall retirement plan to help you meet your goals.
To learn more about jumbo reverse mortgages, simply fill out the form on this page to get a FREE Information Kit from Longbridge Financial, a leader in the reverse mortgage industry.
1Prices vary by location.
2Real estate taxes, homeowners insurance, and property maintenance required.
3 Consult a financial advisor and appropriate government agencies for any effect on taxes or government benefits.
4 If part of your loan is held in a line of credit, you can draw from it for a period of 10 years—the unused portion will grow each month for 7 years, at an annual rate of 1.5% compounded monthly.
5 Except for the first 25% taken at closing.
*State exclusions apply.
