Blog content updated on 11/11/21
Private alternatives to the government-insured Home Equity Conversion Mortgage (HECM) program—also known as proprietary or “Jumbo” reverse mortgages—are becoming more popular, especially among seniors with high-value homes.
“I believe we’ll see substantial growth on new and different products,” said Chris Mayer, CEO of Longbridge Financial, in a webinar hosted by Reverse Mortgage Daily. “I expect us to continue to see real growth, and more in proprietary over HECM products.”
Mayer, along with other industry leaders in the reverse mortgage business, agree that these private reverse mortgage alternatives need to become more widely available to serve the needs of more clients.
In 2019, Longbridge Financial introduced its Platinum reverse mortgage line of credit.
One example of lenders introducing new reverse mortgages to meet specific client needs was the addition of a line of credit option (LOC) to the Longbridge Platinum line of products. This was partly in response to 2017 changes to the HECM program that affected the principal limit factor—and also to offer clients an alternative option to standard Home Equity Lines of Credit (HELOCS), that require monthly mortgage payments.
Since then, the new option has proven to be a popular option for Longbridge borrowers. “We introduced a new Platinum LOC product to help provide borrowers more financial flexibility and at a lower cost than a HECM,” Mayer explained. “It’s already taking hold as a more attractive alternative to widely-used HELOC and cash-out refinancing
The Platinum LOC is ideal for borrowers with high-value homes who want flexibility in choosing when they need to draw on the loan’s proceeds, based on their financial goals.
“Most borrowers with high-priced homes do not need all of their cash at one time, so the product is often more appropriate to their needs, such as extending the life of their retirement assets,” Mayer said.
Longbridge expects that demand for this product will continue to increase as people become more aware of the product and its benefits. The Platinum LOC option is currently available in 18 states, with more states being added on a regular basis.
What is a Platinum reverse mortgage?
It’s an alternative reverse mortgage program, for borrowers 60 and older1 with homes valued at $400,000+, that’s not insured by the Federal Housing Administration (FHA). Like a standard HECM, it allows you to unlock and gain access to a substantial portion of your home equity, but offers more available funds. It’s competitive with many forward mortgages and HELOC programs, with more flexibility—and no monthly mortgage payments required.2
Why is it better than a HELOC?
There are a number of advantages that a private reverse mortgage such as Longbridge Platinum offers as compared to a standard HELOC.
- Unlike a HELOC, the Platinum LOC grows over time.
- Lenders can put a freeze on a HELOC at any time—and sometimes do, especially during economic downturns as we’ve seen recently. With a reverse mortgage, the lender cannot reduce the amount of funds that’s available to you.
- The Platinum LOC is easier to qualify for—and features low upfront costs and comparable rates.
- It’s important to keep in mind that at the beginning of the loan, HELOC payments are interest-only and then fully amortize after 10 years—which can pose a serious problem for seniors, because their payment can suddenly spike when they’re living on a fixed income.
- Even though it’s not insured by the FHA, a Platinum private reverse mortgage includes similar borrower benefits and safeguards of a standard reverse mortgage program. It’s a non-recourse loan which means you’ll never owe the lender more than the home is worth at the time of its sale. The fees on your reverse mortgage include a payment for insurance that ensures you’ll never owe more than your home’s fair market value when the home is sold and the loan is repaid. Plus, like a standard HECM, Platinum includes independent counseling to make sure you fully understand how it works, what your options are, and what your responsibilities will be if you take out the loan.
- Finally—and perhaps best of all—unlike a standard HELOC, a Platinum LOC does not require that you make monthly mortgage payments.2 All you have to do is continue to pay property taxes, home insurance, and keep the home in good repair as you do now.
How can you use it to meet your financial goals?
Paying off an existing mortgage or other debts in order to eliminate monthly payments is just one way to use a reverse mortgage. The possibilities really are endless, because the money is yours to use however you wish—but here are a few common uses for reverse mortgage proceeds:
- Make home repairs or upgrades to help you remain in your home and “age in place.”
- Buy a new home that’s closer to family or better suited to your needs.
- Help out family members financially, or help pay for a grandchild’s education.
- Help pay for healthcare costs or in-home care.
- Set up a financial “safety net” for the future to cover unexpected expenses, or to avoid tapping into invested assets during market downturns.
- Enrich your retirement experience by taking a dream vacation or buying a new vehicle.
Wondering how much home equity you could access? To learn more about a Longbridge Platinum reverse mortgage, call 855-523-4326 or fill out the form on this page to get a free info kit. There’s no cost and no obligation.
To read the full Reverse Mortgage Daily article about private reverse mortgages, click here.
- State exclusions apply.
- Real estate taxes, homeowners insurance, and property maintenance required.