Reverse mortgages have become a popular financial tool for seniors looking to leverage the equity in their homes to supplement retirement income. And while the Home Equity Conversion Mortgage (HECM) is the most common type of reverse mortgage, there is another option offering BIG benefits – the jumbo reverse mortgage!
While both HECM and jumbo reverse mortgages provide valuable solutions for older Americans looking to unlock the equity in their homes, the latter could offer you more options. There are several key differences between the two loan types and the unique benefits of jumbo reverse mortgages make them a compelling choice for individuals looking to secure their financial well-being in retirement.
The Power of Proprietary
Because jumbo reverse mortgages are private loans, also called “proprietary” loans, they aren’t held to the same constraints as government-backed HECM loans. The main difference is that, while HECM loans have a borrowing limit set by the Federal Housing Administration (FHA), jumbo reverse mortgages’ borrowing limits are not. This means borrowers who qualify for a jumbo reverse are able to access more cash than they would have with a HECM. But that’s not the only advantage!
Let’s take a look at the different ways jumbos make an attractive alternative to conventional HECM reverse mortgages for certain homeowners:
- Lower Minimum Age Requirements
For some jumbo reverse mortgages, which are proprietary loans like Longbridge Platinum, the minimum age requirement is lower than the HECM age requirement of 62. For Platinum, the minimum age qualification can be as low as 551 making it a great choice for people who are looking to utilize their home equity but haven’t reached the conventional reverse mortgage age requirement.
- Higher Loan Amounts
Homeowners with substantial equity in their homes often find it challenging to access a large portion of those funds. That’s where jumbo reverse mortgage loans come in! These loans extend beyond the limits set by standard HECMs which means, if you’re a homeowner with a high-value property, you can access a larger pool of funds and gain greater financial flexibility. This is particularly beneficial for those residing in areas with expensive real estate markets and likely a higher cost of living.
A jumbo reverse mortgage can allow you to leverage the full value of your high-value home, turning idle equity into a valuable financial resource. This increased access can be instrumental in funding large expenses or enhancing the overall quality of your retirement. Longbridge Platinum jumbo reverse mortgages offer loan amounts up to $4 million2 – a significantly larger sum than the current HECM lending limit.
- Lower Upfront Costs
The absence of FHA insurance premiums in jumbo reverse loans can contribute to lower overall costs. This financial advantage can make a significant difference over the life of the loan, saving you money in the long run. And while interest rates can vary, jumbo reverse mortgages like Longbridge Platinum offer competitive rates.
- Expanded Property Eligibility
Because HECM loans are confined to the guidelines set by the FHA, there are multiple reasons why some properties don’t make the cut. In addition to catering to properties that are higher in value, jumbo reverse mortgages also allow for properties that aren’t eligible for FHA financing – such as certain condominiums that aren’t FHA approved, or some Planned Unit Developments (PUDs).
These are some of the major ways jumbo reverse mortgages can offer you more flexibility with fewer restrictions. But do jumbos offer the same options and safeguards as HECM loans? The short answer is YES!
Same Great Features and Protections
While there are several major differences (and key advantages) between HECM and jumbo reverse mortgages, they are also very similar in that they both offer a variety of distribution options, the ability to boost your monthly cash flow, ownership retention, and estate planning opportunities.
Let’s dive into these critically important commonalities:
- Flexibility in Loan Distribution
Just like HECMs, jumbo reverse mortgages offer flexible disbursement options, allowing homeowners to receive funds in a lump sum, monthly installments, a line of credit or even a combination of these methods depending on your goals.3 This flexibility gives you the power to tailor your loan structure to meet specific financial obligations. 3
While the Home Equity Line of Credit (HELOC) is a more common choice by and large, a jumbo reverse mortgage line of credit offers compelling advantages over a traditional HELOC. For example, the Longbridge Platinum line of credit is reusable, cannot be frozen, has no MIP (potentially lowering your upfront costs), and offers comparable rates.3 So not only do you get more cash than a HECM, you also get more flexibility than a HELOC – that’s a win-win!
- Ownership Retention:
Contrary to common misconceptions, just like any mortgage, homeowners who take advantage of a reverse mortgage of any kind retain full ownership of their property. As long as you continue to meet property tax, homeowners insurance, and maintenance obligations, you can continue to live in your home without fear of losing ownership.
- Enhanced Cash Flow:
One of the primary benefits of reverse mortgage loans, including jumbos, is increased cash flow. The first step required with any reverse mortgage is to pay off any remaining mortgage balance. Then, there are no new monthly mortgage payments required.4 And by eliminating these monthly commitments and converting your home equity into income tax-free5 cash, you can use the freed-up funds however you’d like, such making home repairs or upgrades, covering healthcare expenses, or fulfilling other financial needs.
- Estate Planning Opportunities:
Just like HECMs, jumbo reverse mortgages can be integrated into your comprehensive estate planning strategy. You can use your funds strategically, either for immediate financial needs or to preserve other assets for future generations. And just like HECMs, jumbo reverse mortgages are non-recourse loans. This means, at the time of the home’s sale, neither you nor your heirs will be held responsible for the difference, if any, between the unpaid loan balance and the value of the home. This important protection shields homeowners from market fluctuations and potential economic downturns.
Well, there you have it. Jumbo reverse mortgages offer unique advantages for eligible borrowers, and they also boast the same great features and protections of HECM loans.
Jumbo reverse mortgage loans have emerged as a valuable financial tool, particularly for those with high-value homes seeking to unlock the full potential of their equity to achieve greater financial peace of mind. If you believe you meet the criteria for a jumbo reverse mortgage, Longbridge Platinum may help you unlock a substantial portion of your home equity. Contact our team today to see if you’re the right fit for this game-changing retirement planning tool.