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Jumbo Reverse Mortgage Loans: An Easy-to-Follow Guide

By Steven J. Sless, CLTC®, Division President, NMLS: #298581

If you want to diversify and prolong your retirement portfolio, a jumbo reverse mortgage loan, also known as a proprietary reverse mortgage, might be the answer.

With a jumbo reverse mortgage, you can borrow against the equity in your home to get tax-free cash.

This guide will cover everything you need to know about jumbo reverse mortgage loans, including how they work, the benefits, and the eligibility requirements.

What is a Jumbo Reverse Mortgage?

A jumbo reverse mortgage loan is a type of home equity loan for homeowners age 55 and older. Jumbo reverse mortgage loans allow borrowers to access up to $4 million on homes valued at up to $10 million.

The loan proceeds can be used for anything you want, whether it’s supplementing your retirement income, paying off debts, or making home improvements.

Best of all, jumbo reverse mortgage loans have flexible eligibility requirements and can be tailored to fit your unique financial situation.

How Do Jumbo Reverse Mortgages Work?

A jumbo reverse mortgage works similarly to a traditional reverse mortgage, except the loan amount is much larger.

With a traditional reverse mortgage, you can borrow up to $$970,800 as of 2022.

With a jumbo reverse mortgage, you can borrow up to $4 million on a home with a value of $10 million or less.

The loan amount is based on the equity in your home, which is the difference between your home’s value and the balance of your mortgage.

For example, if you have a home valued at $1 million with a $300,000 mortgage balance, you would have $700,000 in equity.

If you took out a jumbo reverse mortgage loan for 20 percent, you could borrow a total of $140,000.

The borrowed funds eliminate monthly mortgage payments and can be used for anything you want such as paying for travel, home improvements or grandchildren’s college education, or helping to fund your long-term care strategy.

The jumbo loan balance will not be due until you sell, move out of the property or pass away.

If the value of your home increases, you can borrow more money as long as you don’t exceed the maximum loan limit of $4 million.

Key benefits of jumbo reverse mortgage

Jumbo Reverse Mortgages offer the ability to maximize the value of your home while still living in it.

Some of the key benefits are as follows:

No monthly mortgage payments

No monthly payments are required, so you get the cash you need now and can  keep your monthly cash flow free for other expenses.

Flexible eligibility requirements

A jumbo Reverse Mortgage has flexible eligibility requirements, which means that even if you haven’t been able to qualify for a traditional home equity line of credit (HELOC), you may still be eligible for a jumbo reverse mortgage loan.

Larger loan limits

Since a jumbo reverse mortgage is a private home equity loan, the loan limits are much higher than a traditional reverse mortgage.

This can be a huge benefit if you have a high-value home.

Non-Recourse Loans

A jumbo reverse mortgage is a non-recourse loan, which means that you or your heirs will never owe more than the value of your home.

This protects you and your family even if the loan balance exceeds your home’s value.

No insurance premiums

Since payments aren’t covered under the Federal Housing Administration (FHA) program, borrowers are not required to pay mortgage insurance premiums.

This could potentially save you thousands of dollars over the life of the loan.

What are the Eligibility Requirements for a Jumbo Reverse Mortgage?

In order to be eligible for a jumbo reverse mortgage, you must:

  • Be at least 55 years old
  • Have rough 50 percent equity in your home
  • Be a U.S. citizen or permanent resident
  • Occupy the property as your primary residence
  • Pay property taxes
  • Pay homeowners insurance and
  • Keep up with home maintenance.

These requirements are in place to protect you and ensure that you can afford the loan.

If you meet all of the eligibility requirements, you can apply for a jumbo reverse mortgage through a private lender.

Jumbo reverse mortgage lenders

There are a number of lenders available. It is always recommended that you stick with trusted reverse jumbo mortgage lenders who are dedicated solely to helping homeowners with Jumbo reverse mortgage loans.

Dedicated reverse mortgage professionals that understand all jumbo reverse mortgage limits can best serve borrowers based on their unique situations.

If you are 55 or older and have at least 50 percent equity in your home, take 60 seconds to get a no-cost info kit to determine if a reverse mortgage is right for you. Click here

Differences between jumbo and FHA reverse mortgages

The difference between Jumbo and traditional reverse mortgages, also known as home equity conversion mortgage (HECM), is the lending limit and the amount you can borrow.

Jumbo or proprietary reverse mortgages are also not backed by the U.S. government like an FHA-insured reverse mortgage, making them a higher risk for the lender but generally more flexible for the borrowers.

Jumbo reverse mortgage lenders tend to be more lenient with credit and income requirements than FHA loans.

Payment options

Jumbo reverse mortgage lender gives you the option to receive a lump sum immediate payment.

FHA-insured reverse mortgages allow borrowers to access up to 60 percent of their available proceeds in the first 12 months of having the loan.

The additional 40 percent will become available after this 12-month period.

Interest rate

Jumbo reverse mortgage programs offer fixed and variable interest rates for the life of the loan.

A traditional reverse mortgage loan offers a variable interest rate.

The variable interest rate will fluctuate with the index causing it to change over time.

Private lenders

Jumbo reverse mortgages are only offered by private lenders.

This is why working with a dedicated reverse mortgage professional is important to ensure you get the best jumbo loan for your needs.

Both have pros and cons, depending on what you need and how you plan to use your loan proceeds.

Speaking to the right professional will help you navigate these waters and make the best decision for your retirement planning needs.

If you are 55 or older and have at least 50 percent equity in your home, take 60 seconds to get a no-cost info kit to determine if a reverse mortgage is right for you. Click here

Maturity date

With a jumbo reverse mortgage, there is no maturity date as long as you live in the home and continue to pay your property taxes and insurance.

HECM loans or reverse mortgages may have a maturity date depending on how you structure your loan.

Final Jumbo Reverse Mortgage Considerations

Jumbo reverse mortgage borrowers must be sure to carefully consider their options before taking out a jumbo loan.

This type of loan can be an excellent way to supplement your retirement income, but it’s not right for everyone.

It’s important to work with a jumbo reverse mortgage professional who can help you understand all of your options and make the best decision for your needs.

*Non-HECM (non-government program) reverse mortgage loans, do not have upfront, or ongoing Mortgage Insurance Premiums (MIP). Borrower(s) are still required to pay applicable taxes and homeowner’s insurance. The loan is subject to foreclosure for failure to pay taxes and insurance to maintain the property and insurance. Some products and services may not be available in all states. Terms and conditions apply. Programs, rates, terms and conditions are subject to change and are subject to borrower (s) qualification. This is not a commitment to lend. PRMI NMLS# 3094

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