Jumbo Reverse Mortgage Offers Up To $4 Million to Retired Homeowners In High Value Real Estate Markets

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Retired homeowners in high value real estate markets can get as much as $4 million from a jumbo reverse mortgage. We’ll explain ins and outs of how a jumbo reverse mortgage works and how to qualify for one.

How A Jumbo Reverse Mortgage Works

A reverse mortgage is a unique home loan designed to give you access to your home equity without a monthly mortgage payment or giving up ownership of your home.

The most popular reverse mortgage in America is the FHA-insured home equity conversion mortgage, or HECM (often pronounced heck-um by industry insiders).

The HECM is a great reverse mortgage product, but it has limitations for homeowners in high value real estate markets. HECM proceeds are capped by the FHA loan limit, which prevents homeowners with high value homes from accessing more than a small portion of their home equity.

The jumbo reverse mortgage was created to enable homeowners with high value homes to access significantly more home equity than is available through a HECM.

A reverse mortgage jumbo loan works just like a HECM reverse mortgage. No mortgage payments are required as long as at least one borrower lives in the home, maintains it, and pays the property taxes, homeowner’s insurance, and HOA dues (if applicable).

You remain the owner of your home and you’re free to leave it to your heirs. Your heirs can keep the home by paying off or refinancing the loan balance. If your heirs don’t want the home, they can sell it, pay off the loan, and keep the remaining equity.

Like the HECM, a jumbo reverse mortgage is typically a non-recourse loan, which means the most that will have to be repaid is the value of your home. The lender will cover the shortage if your home isn’t worth enough to pay off the entire balance.

Payout options include lump sum, line of credit, or some combination of the two. Unlike the HECM, there is no option for term or tenure payouts.

Homeowners commonly use reverse mortgage jumbo loan proceeds to:

  • Eliminate existing mortgage payments
  • Eliminate consumer debt payments (credit cards, auto loans, personal loans, etc.)
  • Pay for medical bills
  • Finance home improvements
  • Supplement retirement income
  • Supplement retirement assets
  • Set up a rainy day or emergency fund

You’re free to use the funds for whatever you like.

Jumbo reverse mortgages don’t offer the same non-borrowing spouse protections that come with a HECM. If the older spouse passes away, the younger spouse will have to pay off or refinance the loan balance to remain living in the home.

How Much Can I Get?

How much you can get depends on the value of your home, current interest rates, how the loan is structured, and the age of the youngest borrower. There is no set amount that applies to every homeowner.

Most homeowners tend to qualify for between 35% to 55% of their home’s value, depending on age. If you’re on the younger end of the spectrum, you’ll qualify for less than somebody who is on the older end of the age spectrum.

The maximum payout is $4 million, but only the oldest borrowers with the highest home values in the most favorable interest rate conditions will qualify for that much.

Jumbo reverse mortgages are funded by private investors who don’t publicly publish their interest rates or principal limit tables. We’re not aware of any jumbo reverse mortgage calculators available online, unfortunately. If you’d like to find out how much you can get, you’ll need to contact a lender. We’ll cover more about how to find lenders a little later.

Upfront And Ongoing Costs

A jumbo reverse mortgage is a home loan, so it comes with interest and at least some closing costs.

Interest

Jumbo reverse mortgage rates tend to run higher than HECM interest rates, which are usually comparable to 30-year “forward” mortgage rates.

The interest is calculated the same as any other type of home loan: it accrues monthly based on an annual percentage rate. The difference, of course, is that you don’t have to make payments. Any unpaid interest simply accrues onto the loan balance over time.

Jumbo reverse mortgage interest rates typically aren’t publicly available, so you’ll need to consult with a lender for a formal rate quote. We’ll explain how to find lenders shortly.

You may have heard that mortgage insurance accrues onto the loan balance along with interest. This mortgage insurance is called annual mortgage insurance (MIP), but it only applies to the HECM reverse mortgage. I’m not aware of any jumbo reverse mortgage that charges annual mortgage insurance.

Closing Costs

A reverse mortgage is a home loan, so it usually comes with at least some closing costs, which include:

  • Third party costs: These are the services the lender has to hire to complete your loan. Such services include title insurance, escrow, appraisal, government recording, attorney fees, etc.
  • Origination: Lenders often charge origination fees to cover the costs associated with processing and completing your loan.

Closing costs typically do not have to be paid out of pocket. Most lenders will roll the costs into the new loan amount.

The exception is a purchase reverse mortgage; if you’re buying a home with a reverse mortgage, the closing costs are paid out of pocket as part of your cash to close.

Closing costs vary widely depending on loan scenario, interest rate conditions, and the value and location of your home. If you’d like to get an accurate closing cost estimate, you’ll need to contact a jumbo reverse mortgage lender.

If you’re familiar with reverse mortgages already, you may have heard that you’ll have to pay a large upfront mortgage insurance premium. This premium is called initial mortgage insurance premium (IMIP), but it only applies to the HECM reverse mortgage. The fact that jumbo reverse mortgages don’t come with IMIP is a nice advantage that helps keep your closing costs low.

Servicing Fees

Servicing fees are less common than they used to be, but you may still run across them. Some jumbo reverse mortgage loans may have servicing fees of around $20 to $30 per month.

Servicing fees typically do not need to be paid out of pocket. Like interest, they simply accrue onto the loan balance over time.

Jumbo Vs HECM

The following chart summarizes the main differences between a jumbo reverse mortgage and a HECM reverse mortgage.

JumboHECM
Minimum Age6062
Maximum ProceedsMax $4,000,000 *Max 75% of the loan limit *
Interest RatesFixed and AdjustableFixed and Adjustable
Payout OptionsLump sum, line of creditTerm, tenure, lump sum, line of credit
Initial Mortgage Insurance Premium (IMIP)NoYes
Annual Mortgage Insurance Premium (MIP)NoYes
Monthly Servicing Fee$20/month for some programs$0 to $30 per month, depending on lender
Non RecourseYesYes
FHA-insuredNoYes
Prepayment PenaltyNoNo
AppraisalTwo appraisals requiredOne appraisal required (usually)
CondosFHA approval not requiredFHA approval required
AvailabilityAvailable in a handful of statesAvailable in all 50 states
* How much you qualify for depends on age, home value, and current interest rates. Most borrowers will qualify for significantly less than the maximum.

Pros and Cons of a Jumbo Reverse Mortgage

Like anything, there are pros and cons to a jumbo reverse mortgage. I’ve worked with homeowners who qualified for a jumbo, but chose to go with a HECM instead because it worked better for them.

The following is a rundown of the main pros and cons you’ll want to keep in mind as you evaluate a jumbo versus a HECM.

Pros

  • Larger payouts – Jumbo reverse mortgages offer significantly higher payouts for homeowners with high value homes.
  • Lower upfront costs – Jumbo reverse mortgages don’t have IMIP, which means your closing costs could be significantly lower than a comparable HECM.
  • No annual mortgage insurance – Jumbos don’t have annual mortgage insurance premium (MIP).
  • Condos – If you own a condo, your condo complex does not need to be FHA-approved.
  • Qualifying flexibility – Because jumbo reverse mortgages are funded by private investors, they’re not subject to the rigid FHA guidelines that apply to HECMs. There is some flexibility in the lending requirements for borrowers who don’t quite fit in the “box”.

Cons

  • Higher interest rates – Jumbo mortgages (whether “forward” or reverse) tend to have higher interest rates than non-jumbo loans.
  • Not FHA-insured – If your lender goes out of business, you may lose access to any remaining funds in your reverse mortgage.
  • Line of credit growth – Jumbo reverse mortgages usually offer line of credit growth, but it’s typically not as attractive as the growth on a HECM line of credit.
  • Non-borrowing spouses – Jumbo reverse mortgages typically do not offer protections for non-borrowing spouses who want to remain living in the home after the older spouse dies.
  • Fewer payout options – Jumbos typically don’t offer term or tenure payout options.
  • Minimum payouts – Some jumbo products may require you to borrow a minimum amount at closing.

Qualifying for a Jumbo Reverse Mortgage

In the past, there were few reverse mortgage income and credit qualifying requirements. You could have terrible credit and zero income and still qualify.

FHA implemented new qualifying guidelines for the HECM in 2014 to help limit defaults due to nonpayment of property taxes, homeowner’s insurance, and HOA dues (where applicable).

Jumbo reverse mortgage requirements are largely the same as the HECM qualifying requirements, so you can expect jumbo reverse mortgage lenders to evaluate your credit and income as part of the application and approval process.

The lending guidelines are tighter today than in the past, but it’s still relatively easy to get a reverse mortgage. You don’t need to have a lot of income and you don’t need to have perfect credit. In fact, lenders usually don’t even care about your credit scores.

Lenders are mainly concerned with the following:

  • Payment histories on debts and property charges: It’s usually OK to have a few late payments here and there as long as there aren’t too many of them. Lenders are most concerned with your payment histories for property taxes, homeowner’s insurance, and HOA dues (if applicable). It’s extremely important that you’ve paid your property charges on time.
  • Residual income: Your lender wants to make sure you have enough residual income left over at the end of the month after paying your property charges, debt payments, and estimated utilities.

You may still qualify if you don’t meet the payment history or residual income requirements. Lenders have flexibility to still approve your loan by documenting certain compensating factors or extenuating circumstances that offset the derogatory credit and/or income shortfall, respectively.

If you don’t have any valid compensating factors or extenuating circumstances, you may still qualify with a life expectancy set-aside (LESA).

Counseling

Counseling is required when you apply for a jumbo reverse mortgage. The purpose of counseling is to ensure that you understand basic concepts and information about reverse mortgages.

The counseling session is usually conducted by an independent third-party licensed counselor and usually costs around $200. Once the counseling is complete, you’ll be issued a certificate that you’ll need to provide to your lender.

You can easily find counselors in your area or across the nation using our reverse mortgage counselors directory. Your lender may also be able to provide a list of counselors.

Not all reverse mortgage counselors do jumbo reverse mortgage counseling. As you call counselors to book an appointment, make sure you let them know that you’re applying for a jumbo reverse mortgage.

How To Find Lenders

If you’d like to explore your jumbo reverse mortgage options, we recommend reaching out to a reputable lender. Finding lenders to work with is pretty easy. I suggest asking for referrals from friends, colleagues, neighbors, and relatives. A trusted real estate agent, financial adviser, or CPA may also be a good referral source. A lot of people have reverse mortgages, so it’s likely you know somebody who can give you a lender recommendation.

If you don’t know anybody who give a referral, try Googling top lenders or searching our reverse mortgage lender directory. Note that you don’t necessarily need to work with a lender located in your area. There are many good national lenders licensed in your state.

A reputable lender will thoroughly cover reverse mortgage basics and take the time to learn about your financial goals. If the lender you’re working with seems impatient or pushy, we recommend finding another one.

Not all lenders offer a jumbo reverse mortgage, but most of the top lenders likely do. You can find top lenders on the HECM endorsement reports.

Frequently Asked Questions

Are there jumbo reverse mortgages?

Yes, jumbo reverses are available, but not in all states. You’ll want to consult with a reverse mortgage lender to find out how much you can get and if a jumbo is available in your state.

What is the maximum amount of a reverse mortgage loan?

How much you can get depends on your age, home value, current interest rates, and the type of reverse mortgage you go with. There’s no set amount that applies to every homeowner. Check out our reverse mortgage calculator to see how much you may be able to get.

Where can I find a jumbo reverse mortgage calculator?

Jumbo reverse mortgages are a small portion of the reverse mortgage marketplace and they’re funded by private investors. We’re not aware of any jumbo reverse mortgage calculators available online. We recommend consulting with a reputable reverse mortgage lender to get an estimate of how much you can get.

What is a jumbo reverse mortgage?

A jumbo reverse mortgage is designed to give homeowners in high value real estate markets access to more home equity than is available through the more common FHA-insured HECM reverse mortgage. Jumbo reverse mortgages typically offer as much as $4 million, depending on home value, age, and current interest rates. No mortgage payments are required as long as at least one borrower lives in the home, maintains it, and pays the property taxes, homeowner’s insurance, and HOA dues (if applicable). You remain the owner of your home and you’re free to leave it to your heirs, who will inherit the remaining equity in your home.

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About Mike Roberts

Mike Roberts is the founder of MyHECM.com, a published author, and a highly experienced mortgage industry veteran with over a decade of mortgage banking experience. When he's not working, he enjoys spending time with his family, skiing, camping, traveling, or reading a good book. Roberts is the author of The Reverse Mortgage Revealed: An Industry Insider’s Guide to the Reverse Mortgage, which is available on Amazon.