Whether you’re planning for retirement or settling into those long-anticipated “golden years,” you likely have a laundry list of fun activities, hobbies, or maybe even trips you’re anxiously awaiting to check off. But how exactly are you planning on funding them?
While FHA Home Equity Conversion Mortgages (HECMs) have become an especially attractive financial tool for tapping into the wealth you’ve built up in equity over the years, the reality is that the HECM program is limited to a maximum loan amount set by the Federal Housing Administration (FHA). But what if you could access even more in loan proceeds? If you’re a high-value homeowner, you just might be able to…
For example, a 77-year-old couple with a home value of $1,250,000 looking to maximize loan proceeds initially sought a quote for a HECM. With the standard HECM, their maximum proceeds were capped at $467,931. However, with a jumbo reverse mortgage – in this case, Longbridge Platinum – the couple was able to draw into significantly more equity in the home and increase their maximum proceeds to $723,750.
New jumbo, non-FHA reverse mortgage programs such as Platinum, have become valuable low-cost alternatives to traditional HECMs or Home Equity Lines of Credit (HELOCs) for seniors with high-value homes who want to access even more home equity. With more available cash than a HECM and greater flexibility than a HELOC, it may just give you the additional proceeds you need to live out your golden years to the fullest.
But let’s start by answering a simple question: what exactly is a jumbo reverse mortgage?
“What is a jumbo reverse mortgage?”
A jumbo reverse mortgage (also known as a “proprietary” or “private” reverse mortgage) is a loan designed for homeowners with home values greater than $400,000 to access home equity amounts greater than the FHA HECM lending limit. Similar to a HECM, a jumbo reverse mortgage allows you to maintain full title and ownership to your home. You also are not required to make monthly mortgage payments1 and the loan proceeds can be used however you wish. The key difference is that a jumbo reverse mortgage is designed and offered via individual financial institutions. As such, jumbo reverse mortgage limits are higher, allowing you to access more equity.
If you’re a high-value homeowner, a jumbo reverse mortgage may be an attractive option to tap into even more home equity to fund what matters most to you. Here are 4 reasons to consider a jumbo reverse mortgage loan.
- More available equityLet’s start with the most obvious benefit of a jumbo reverse mortgage – more money. While a standard FHA HECM reverse mortgage only offers amounts up to a maximum claim (currently $822,375 in 2021), jumbo reverse mortgages allow you to access substantially more in available proceeds. For instance, our Longbridge Platinum mortgage allows you to access up to $4 million in proceeds.Simply put, a higher value home often equates to a larger pool of equity to draw from. And while HECM loans cap their proceeds according to the FHA lending limit, jumbo reverse mortgage loan limits are higher, so you can access more equity. Also, depending on loan terms, jumbo reverse mortgages could allow immediate access to full proceeds.
- Ability to eliminate larger mortgage balancesOne of the top advantages of any reverse mortgage is the ability to leverage the loan proceeds to eliminate any existing debts. And what’s the largest source of household debt among Americans? You may have guessed it – mortgages. In fact, mortgage balances reached $10.04 trillion in the fourth quarter of 20202.While an FHA HECM allows you to refinance small mortgage balances, jumbo reverse mortgages allow borrowers to refinance much larger balances – in the ballpark of several hundred thousand dollars or even more. This is especially good news if you live in an area with a high cost of living.
- No mortgage insurance premiumsIf you’re considering a reverse mortgage, you’re probably familiar with the costs and fees that come with the loan. And if you’re not – feel free to check out our blog for a quick refresher. While reverse mortgage closing costs have the potential to add up quickly, one of the major costs borrowers are faced with is the mortgage insurance premium – both the initial payment and ongoing annual payments. This mortgage insurance is required by the Department of Housing and Urban Development (HUD) on all HECM loans to offer protection for borrowers and their heirs.However, since jumbo reverse mortgages are not FHA-insured products, borrowers are not required to pay upfront or annual mortgage insurance premiums. As such, closing costs on a jumbo reverse mortgage are often significantly lower than those of a standard FHA HECM – making them an attractive and effective way to get the benefits of a reverse mortgages, without the potentially high cost.
- Robust borrower protectionsAs previously mentioned, jumbo reverse mortgages are not FHA-insured loans – which means they are not subject to mortgage insurance premiums. However, while these loans are not subject to the required insurance, they still offer robust borrower protections. As a matter of fact, many jumbo reverse mortgages offer protections that mimic those offered by FHA, including non-recourse protection. As a non-recourse loan, you or your heirs are protected from ever owing the lender more than the home is worth at the time of sale.While borrower protections are often included in jumbo loans, they are not guaranteed. If you’re considering a jumbo reverse mortgage, make sure you ask your lender about specific borrower protections they offer.
With different lenders offering their own versions of jumbo reverse mortgages with unique guidelines, interest rates, and features, finding the jumbo reverse mortgage that works best for you is imperative.
At Longbridge, we proudly offer our Platinum proprietary product. It’s a private, non-FHA reverse mortgage that offers more cash than a standard reverse mortgage – depending on your home’s value, up to $4,000,000 – with low costs. Plus, our new line of credit option compares favorably to a standard HELOC, with more flexibility and no monthly mortgage payments required1.
1Real estate taxes, homeowners insurance, and property maintenance required.