Jumbo Reverse Mortgages – also known as Proprietary Reverse Mortgages are loans designed and offered by financial institutions that enable owners of high value homes to access greater amounts of their home equity than is available from the government insured HECM Reverse Mortgages.
What Kinds of Reverse Mortgage Loans Are Currently Available?
Currently, the only kind of Reverse Mortgage that is widely available is the Home Equity Conversion Mortgage (HECM) family of loans. These loans are created and insured by the federal government and managed by the Department of Housing and Urban Development (HUD).
The current relative absence of Jumbo Reverse Mortgages is largely due to the credit crunch that is being experienced world wide. A credit crunch is generally defined as a decrease in the availability of loans. Jumbo Reverse Mortgages can be risky for lenders to originate, especially if there are: Declining house values – The home is the collateral on the Reverse Mortgage loan, if the home’s value declines, it is a much riskier loan for the lender to issue.
- General perceptions of risk regarding the solvency of private banking institutions – Jumbo Reverse Mortgages were proprietary products designed by private institutions and were not insured by the Federal government as the HECM is.
- Limited secondary markets for these loans – Loans are often originated by one bank and then resold on a secondary market. Currently Wall Street has limited demand for these loans from banks that originate them.
In summary, as housing values have been recovering and the credit crunch has improved, Jumbo Reverse Mortgages may become available again.
Loan Limits and Jumbo Reverse Mortgages
The maximum loan amount on a traditional HECM Reverse Mortgage used to be as low as $200,000. In 2009, Congress passed legislation that increased Reverse Mortgage loan limits to $625,500. This loan limit increase on the HECM Reverse Mortgage has decreased the need for Jumbo Reverse Mortgage loans – since Jumbo Reverse Mortgages were originally only offered on high value homes.
For homeowners of high value homes – usually homes valued at $600,000 or more – a Jumbo Reverse Mortgage usually offered significantly higher amounts of money to the homeowner. The HECM product could not offer higher loan amounts because they were legislated with loan limits – they could not lend more than pre-specified amounts. In fact, the HECM product was originally designed specifically for low and medium value properties.
Other options for high value homeowners seeking access to their home equity include: Home Equity Conversion, Downsizing and Home Equity Loans.
What Is a Jumbo Reverse Mortgage or Proprietary Reverse Mortgage?
Jumbo Reverse Mortgages – also known as Proprietary Reverse Mortgages – are Reverse Mortgages that are structured and backed by private companies. (The HECM programs, by contrast, are structured and insured by the federal government.)
Any broker licensed by the Federal Housing Administration (FHA) can offer the HECM and any broker licensed by the private company that structured a proprietary reverse mortgage can offer that product.
How Does a Jumbo Reverse Mortgage Differ From Other Reverse Mortgages?
A Jumbo Reverse Mortgage is a Reverse Mortgage product designed for high value homes – typically homes valued above the $625,000 level although the specifics of the loan will depend on the borrower’s age and location.
So, the main difference is simply that it is possible to get more money out of a high value home with a Jumbo Reverse Mortgage than from other Reverse Mortgage products.
Who Offers a Jumbo Reverse Mortgage? What are the Different Kinds of Jumbo Reverse Mortgages?
Jumbo Reverse Mortgages are Reverse Mortgage loans structured by private firms. Like the HECM programs, they are heavily regulated, but they are proprietary products offered directly by private institutions.
More proprietary reverse mortgage programs may be reintroduced as the housing and credit markets stabilize to meet the evolving needs of senior homeowners.
We will try to match you to the latest Jumbo Reverse Mortgage lenders.
What Are the Downsides of a Jumbo Loan or a HECM Reverse Mortgage With a High Loan Amount?
The obvious downside is the same as the upside... with a Jumbo Loan – or a HECM Reverse Mortgage with a high loan amount – you are simply borrowing more money. And, if you take out that money in cash then you will be paying more interest.
However, many high value homeowners choose to take their loans as a line of credit where you only pay interest on the sum you actually use. And, as with all Reverse Mortgages, you don’t have interest payments during the term of the loan nor should you owe more than the value of the home at the time the loan is ended. And, so long as you reside in the home, you will always retain ownership.
Further good news is the fact that the HECM typically has charged a lower interest rate than the Jumbo Reverse Mortgage products.
Are There Limits on How to Spend a Jumbo Reverse Mortgage? Are There Limits on How to Spend HECM Reverse Mortgage Loan Amounts on High Value Homes?
There are absolutely no limits on how you can spend your Jumbo Reverse Mortgage. Nor are there any with a HECM. However, you must pay off any liens against your home, including any balance on your mortgage – which is true of the Jumbo products as well.
Retirees have used Reverse Mortgages to fund:
- Living Expenses
- Long Term Care
- Medical Procedures
- Additional insurance
- Vacation Homes
- Anything and Everything
To connect with a prescreened HUD-approved Reverse Mortgage lender, continue here.