Jumbo Reverse Mortgage
Have you recently retired and looking to fund your retirement by tapping into the equity you’ve been building up in your home? Is your home worth at least one million dollars or more? If that’s the case, a traditional reverse mortgage might not give you the most bang for your buck, so what you may want to look into what is known as a jumbo reverse mortgage.
Epidemic: If you are considering a jumbo reverse mortgage, while other financial products are being effected by the current Coronavirus epidemic, reverse mortgage programs remain unaffected in the marketplace. Call me with any questions: (720) 336-7250
Reverse mortgages – available only to seniors age 62 or older – are a means for someone to convert a portion of the equity in their home into cash. The person taking out the reverse mortgage doesn’t have to make monthly payments to repay it, and still retains full ownership of their home. However, they are still responsible for paying property taxes, insurance and home maintenance costs.
A reverse mortgage can be used to fund retirement, go on vacation, build a nest egg, or any other purpose. A reverse mortgage can be repaid by selling the house for a variety of reasons, such as because the owner is moving or has passed away.
The majority of reverse mortgages are loans guaranteed by the Federal Housing Administration (FHA). Reverse mortgages guaranteed by the FHA are called Home Equity Conversion Mortgages (HECM).
Traditional reverse mortgages currently max out at $822,325 as of 2021; however, if your property is worth more than that amount, you may want to consider the benefits that a jumbo reverse mortgage can have for you; while very similar to traditional reverse mortgages, jumbo reverse mortgages also have several important factors that set them apart as well.
What Is A Jumbo Reverse Mortgage, And What Does It Do?
Traditional reverse mortgages face a loan limit of $822,325, but homeowners with more equity than that will not be able to access all of the value of their houses; that’s where a jumbo reverse mortgage comes into play, since they can enable homeowners to access as much as $6 million worth of home equity.
Unlike traditional reverse mortgages, jumbo reverse mortgages are not FHA guaranteed, so lenders can disregard FHA guidelines on loan size; however, jumbo reverse mortgages do adhere to most other FHA guidelines, including lenders offering borrower protections.
For example, the majority of jumbo reverse mortgages are known as “non-recourse” loans, meaning that if the balance of the loan exceeds the value of the home, the lender is forced to absorb the loss; the homeowner is not responsible. However, this type of protection is not guaranteed, so be sure to ask your lender if your jumbo reverse mortgage is indeed a non-recourse loan or not.
In addition, co-borrowers and eligible non-borrowing spouses (who must be married at the time the loan is taken out) may stay in the home for as long as they like, so long as they keep up with taxes, insurance, and maintenance payments. But again, this is not guaranteed, so be sure to ask your lender if their provision is available.
A major advantage of a jumbo reverse mortgage, in addition to the larger funding limit – up to $6 million – is that it allows you access to the full proceeds of the loan immediately; in contrast, a traditional reverse mortgage only allows you access to portions of your loan at a time, typically in the form of a line of credit or a monthly disbursement of funds. But while getting all of your money up-front may sound appealing, it also means that you will have to be responsible to use those proceeds as needed throughout retirement.
Interest rates on a jumbo reverse mortgage are typically higher than on a FHA guaranteed loan – typically by 2 percent – so taking one out only makes sense if your home is valued at $1 million or more.
Jumbo reverse mortgages can be used to eliminate monthly mortgage payments while allowing retirees to stay in the area that they’ve come to call home. An FHA guaranteed reverse mortgage allows borrowers to refinance small mortgage balances, but jumbo reverse mortgage allows borrowers to refinance mortgage balances of several hundred thousand dollars or more.
Since jumbo reverse mortgage payments aren’t FHA-guaranteed products, borrowers don’t have to pay upfront or ongoing mortgage insurance premiums. And since jumbo reverse mortgages are currently considered fixed rate loans, your loan size will increase at a predictable rate without any major hikes.
Finding a jumbo reverse mortgage maybe difficult, as fewer lenders offer them; one way of finding one is to work directly with a reverse mortgage professional, who will have extensive knowledge of the reverse mortgage marketplace where you reside. A U.S. Department of Housing and Urban Development (HUD) counselor can be helpful as well.
In closing, if you own a home that is worth $1 million or more and are interested in tapping into the equity that you’ve been building up over the years, a jumbo reverse mortgage might be exactly what you need, especially if you’re looking for funds to use for your retirement. But make sure you do your homework about jumbo reverse mortgages and always utilize the services of a trustworthy reverse mortgage specialist.
