Jumbo reverse mortgages are designed for homeowners with properties that exceed the Federal Housing Administration’s (FHA) maximum loan limit, which for 2024 is set at $1,089,300. These mortgages allow homeowners to access a larger portion of their home’s equity compared to a standard reverse mortgage, making them an attractive option for those with high-value homes.
The key feature of a jumbo reverse mortgage is its ability to offer more funds than a traditional Home Equity Conversion Mortgage (HECM), which is the most common type of reverse mortgage and is insured by the FHA. Since jumbo reverse mortgages are not federally insured, they come with different terms and conditions, and the eligibility criteria can vary between lenders.
Who Does Jumbo Reverse Mortgages?
If you’re wondering "who does jumbo reverse mortgages?", the answer lies primarily with private lenders. Since jumbo reverse mortgages are not insured by the FHA, they are offered by private financial institutions, such as banks, credit unions, and specialized reverse mortgage companies. Some of the leading providers in this space include:
1. Longbridge Financial
Longbridge Financial is a prominent player in the reverse mortgage industry, offering jumbo reverse mortgages under their “Platinum” product line. They cater to homeowners with high-value properties, providing loan amounts that exceed the FHA limits. Longbridge Financial is known for its customer-centric approach, offering competitive rates and personalized services.
2. Finance of America Reverse (FAR)
Finance of America Reverse is another major provider of jumbo reverse mortgages. Their proprietary “HomeSafe” product allows homeowners to access larger loan amounts with flexible payout options, including lump sums, monthly payments, or a line of credit. FAR is recognized for its expertise in the reverse mortgage market and its wide range of loan products.
3. Reverse Mortgage Funding (RMF)
Reverse Mortgage Funding offers jumbo reverse mortgages under their “Equity Elite” product. RMF provides tailored solutions for homeowners with high-value properties, offering loan amounts that surpass the traditional reverse mortgage limits. They are known for their innovative products and customer support.
4. AAG (American Advisors Group)
AAG is one of the most well-known names in the reverse mortgage industry, and they also offer jumbo reverse mortgages. Their product, “AAG Advantage,” is designed for homeowners with high-value homes, allowing them to borrow more than what is available through a standard HECM. AAG is reputed for its comprehensive customer education and support throughout the reverse mortgage process.
5. Mutual of Omaha Mortgage
Mutual of Omaha Mortgage offers jumbo reverse mortgages as part of their proprietary loan products. They are known for their reliable customer service and competitive rates. Their jumbo reverse mortgage solutions are tailored to meet the needs of homeowners with significant home equity, providing flexible options for accessing funds.
What Are the 3 Types of Reverse Mortgages?
Understanding the different types of reverse mortgages is crucial when considering your options. There are three primary types of reverse mortgages, each catering to different needs and circumstances:
1. Home Equity Conversion Mortgage (HECM)
The Home Equity Conversion Mortgage (HECM) is the most common type of reverse mortgage and is backed by the Federal Housing Administration (FHA). It is available to homeowners aged 62 and older, allowing them to convert a portion of their home’s equity into cash. HECMs offer various payout options, including a lump sum, monthly payments, a line of credit, or a combination of these.
HECMs are subject to the FHA’s loan limits, which means they may not be suitable for homeowners with high-value properties. However, they do offer certain protections, such as non-recourse provisions, which ensure that homeowners or their heirs will never owe more than the home’s value when the loan is repaid.
2. Proprietary Reverse Mortgages
Proprietary reverse mortgages, also known as jumbo reverse mortgages, are private loans offered by financial institutions that are not insured by the FHA. These mortgages are designed for homeowners with properties that exceed the FHA’s loan limits. Proprietary reverse mortgages allow homeowners to access larger loan amounts, making them ideal for those with high-value homes.
Since these loans are not subject to FHA regulations, the terms, conditions, and eligibility requirements can vary significantly between lenders. However, they often offer more flexible options for accessing home equity, including the ability to receive larger lump sums or a line of credit.
3. Single-Purpose Reverse Mortgages
Single-purpose reverse mortgages are the least common type and are typically offered by state and local government agencies or non-profit organizations. These loans are designed to serve a specific purpose, such as paying for home repairs, property taxes, or other approved expenses.
Single-purpose reverse mortgages are generally smaller in amount and come with lower costs than HECMs or proprietary reverse mortgages. They are usually only available to low- or moderate-income homeowners, and the funds must be used for the specified purpose outlined in the loan agreement.
The Benefits of Jumbo Reverse Mortgages
Jumbo reverse mortgages offer several benefits that make them an attractive option for homeowners with high-value properties:
1. Access to Larger Loan Amounts
One of the primary advantages of jumbo reverse mortgages is the ability to access larger loan amounts than what is available through a standard HECM. This is particularly beneficial for homeowners with high-value properties who need significant funds for retirement, medical expenses, or other financial needs.
2. No Monthly Mortgage Payments
Like other reverse mortgages, jumbo reverse mortgages do not require the homeowner to make monthly mortgage payments. Instead, the loan is repaid when the homeowner sells the property, moves out permanently, or passes away. This feature can provide financial relief to retirees who want to eliminate their monthly mortgage obligations.
3. Flexible Payout Options
Jumbo reverse mortgages offer flexible payout options, allowing homeowners to choose how they want to receive their funds. Depending on the lender, options may include a lump sum, monthly payments, a line of credit, or a combination of these. This flexibility allows homeowners to tailor the loan to their specific financial needs.
4. No Impact on Social Security or Medicare
The proceeds from a jumbo reverse mortgage are generally not considered income, which means they do not affect Social Security or Medicare benefits. This can be a significant advantage for retirees who rely on these programs for their primary source of income and healthcare.
5. Non-Recourse Loan
Jumbo reverse mortgages are non-recourse loans, meaning that the homeowner or their heirs will never owe more than the home’s value when the loan is repaid. This provision protects borrowers and their families from owing a large debt if the home’s value decreases or if the loan balance exceeds the home’s worth.
Considerations Before Taking a Jumbo Reverse Mortgage
While jumbo reverse mortgages offer many benefits, there are also important considerations to keep in mind before proceeding with this type of loan:
1. Higher Interest Rates
Jumbo reverse mortgages typically come with higher interest rates compared to standard HECMs. Since these loans are not federally insured, lenders may charge a premium to offset the additional risk. It’s essential to compare rates from different lenders to ensure you’re getting the best deal.
2. Loan Fees and Costs
Like other reverse mortgages, jumbo reverse mortgages come with various fees and closing costs. These can include origination fees, appraisal fees, servicing fees, and mortgage insurance premiums. These costs can add up, so it’s crucial to factor them into your decision-making process.
3. Impact on Inheritance
Since a jumbo reverse mortgage is repaid from the sale of the home, it can reduce the amount of inheritance left to heirs. It’s important to discuss this aspect with your family and consider their needs before taking out a jumbo reverse mortgage.
4. Complexity
Jumbo reverse mortgages can be more complex than standard HECMs, with varying terms and conditions depending on the lender. It’s essential to thoroughly understand the loan agreement and seek professional advice if needed to ensure that the loan meets your financial goals.
How to Apply for a Jumbo Reverse Mortgage
If you’re interested in applying for a jumbo reverse mortgage, the process typically involves the following steps:
1. Research Lenders
Start by researching lenders who offer jumbo reverse mortgages. Look for reputable companies with experience in the reverse mortgage industry and positive customer reviews. It’s also a good idea to compare loan products, interest rates, and fees from multiple lenders to find the best option for your needs.
2. Schedule a Consultation
Once you’ve identified potential lenders, schedule a consultation to discuss your options. During this meeting, the lender will assess your financial situation, explain the terms of the loan, and answer any questions you may have. This is also an opportunity to clarify any details and ensure that you fully understand the loan process.
3. Submit an Application
If you decide to proceed, you’ll need to submit a formal application. The application process typically involves providing documentation related to your income, assets, and property value. The lender will also conduct a credit check and may require an appraisal of your home to determine its current market value.
4. Loan Approval and Closing
Once your application is approved, the lender will provide you with a loan agreement outlining the terms and conditions. Review the agreement carefully and consult with a financial advisor if needed. After signing the agreement, the loan will proceed to closing, where you’ll finalize the paperwork and receive your funds
