Table of Contents
With a jumbo reverse mortgage, seniors younger than 62 who reside in high-priced homes with substantial equity may be able to access up to $4 million.
The money can be utilized to address fluctuating healthcare demands or to replace a traditional mortgage with one that does not require monthly payments.
Despite the fact that jumbo reverse mortgages and conventional reverse mortgages share many similarities, it is important to understand their distinctions to ensure that they meet your financial goals.
What is a reverse jumbo mortgage?
A jumbo reverse mortgage is a program offered by private lenders that allows you to borrow more than the Home Equity Conversion Mortgage (HECM) loan restrictions established by the Federal Housing Administration (FHA).
The “maximum claim amount” for the HECM program in 2021 is $822,375 for the entire country.
If the reverse mortgage amount exceeds the FHA HECM loan limit, a jumbo reverse mortgage is required.
However, you must still satisfy the fundamental reverse mortgage standards, which include:
➣ You must occupy the financed property as your primary residence
➣ You must have sufficient equity to cover the present loan sum and any additional cash you desire.
➣ You must demonstrate the ability to pay your property taxes and insurance premiums.
➣ You must perform home maintenance.
What You Should Know
Some private reverse mortgage schemes may lend to applicants at age 60, which is two years younger than the HECM minimum age requirement of 62.
Nevertheless, the younger you are, the less equity you can borrow. Request that your loan officer conduct some calculations to ensure that the amount you’re eligible for aligns with your financial goals.
The advantages and disadvantages of a jumbo reverse mortgage
Advantages:
➣ You can receive a larger lump sum or line of credit. With a Jumbo reverse mortgage, you can borrow up to $4 million in a flat amount or through a line of credit, providing you extra borrowing power for other financial goals.
➣ You will not be paying mortgage insurance. Due to the fact that jumbo reverse mortgages are not guaranteed by any government agency, you must pay the FHA an upfront mortgage insurance cost of 2 percent of the loan balance in addition to a continuing insurance premium that increases as the loan balance rises.
➣ You can qualify for a reverse mortgage earlier in life. The minimum age for an FHA HECM is 62, whereas proprietary reverse mortgages enable borrowing at age 60.
Disadvantages:
➣ Your interest rate will be more than that of a conventional reverse mortgage. Although this will not affect your monthly budget because you do not have a payment, a higher interest rate will result in a faster erosion of your equity as your loan balance increases. If property values decline, you may wind yourself owing more than your home is worth.
➣ You may not have the same legal safeguards. Private businesses establish the standards for jumbo reverse mortgages, which might increase your risk of foreclosure or leave your heirs with the burden if your property is worth less than the loan total when you die.
➣ You may be more susceptible to reverse mortgage fraud. Since the FHA does not establish rules for jumbo reverse mortgages, it may be simpler for unscrupulous reverse mortgage con artists to take advantage of senior borrowers.
Be wary of reverse mortgage pitches that attempt to combine home repair services, stock market investments, or assertions that you cannot lose your home if you take out their loan.
Submit a complaint with the Consumer Financial Protection Bureau if you believe you’ve been a victim of a reverse mortgage fraud (CFPB).
How to find the best jumbo reverse mortgage rates
When you’re borrowing millions of dollars secured by your home, shopping for a mortgage is much more critical.
If you’re uncertain whether you’re receiving a good bargain, it may be worthwhile to consult with a HUD-approved housing counselor.
It is not required for a jumbo reverse mortgage, but it may be worthwhile to pay a small fee for a second opinion before borrowing millions of dollars in reverse mortgage equity.
Should you obtain a reverse jumbo mortgage?
A jumbo reverse mortgage can be an effective financial strategy if you own an expensive property and owe a small amount on it or do not have a mortgage.
A jumbo reverse mortgage makes sense if:
➣ You wish to repay your existing jumbo debt. If you are carrying a jumbo loan balance and the monthly has become unaffordable, you can pay it off with a jumbo reverse mortgage.
➣ You are aware of how the increased interest rates damage your equity. Jumbo reverse mortgages tend to have higher interest rates than FHA-insured reverse mortgages, so your loan balance will increase more rapidly over time.
If you can achieve your financial objectives with a loan balance within the HECM restrictions, you will retain a greater portion of your equity.
➣ You need additional funds for retirement. Whether you are supplementing an underfunded retirement account or preparing for assisted living assistance in your home, jumbo reverse funds may provide an additional safety net to help you maintain your lifestyle as you age.
➣ You are renovating your home to accommodate changing health and age requirements. In order to age in place safely, reverse mortgage funds can be used to cover the expense of home improvement safety enhancements.
➣ You are aware of the protections offered by your lender. Most reverse mortgages include built-in safeguards that prevent you from having to pay the difference if your loan debt exceeds the value of your house.
Or enable a non-borrowing spouse to remain in the home as long as the property is maintained, and taxes and insurance are paid. In general, jumbo reverse mortgages give similar protections, but you should confirm this with your loan officer.
Summary
➣- Jumbo reverse mortgages are designed for senior citizens who possess expensive real estate, are cash-strapped, and require greater access to their home equity than government-insured reverse mortgages permit.
➣ Common eligibility requirements include the borrower owning more than 50 percent of their home’s equity, occupying the home as their principal residence, and being at least 55 years old.
➣ The amount you can borrow depends on your age, the appraised value of your home, and the amount of equity you have in the property.
➣ Recipients of jumbo reverse mortgages are generally not obligated to repay the amount borrowed plus interest for as long as they reside in the home.
➣ Less regulation implies that jumbo reverse mortgage terms can vary significantly between lenders.