How Jumbo Reverse Mortgages Work

While most reverse mortgages are insured by the Federal Housing Administration (FHA) through its Home Equity Conversion Mortgage (HECM) program, there are also a rising number of non-FHA reverse mortgages known as proprietary products or private products. Among those non-FHA reverse mortgages, the programs offering loan amounts higher than the FHA’s lending limit typically are referred to as “jumbos.”

Like jumbo programs in the forward mortgage market, reverse mortgage jumbos typically extend more borrowing potential to homeowners in that their lending limits exceed the current $822,375 lending limit set by FHA.

Jumbo reverse mortgages are available to qualifying homeowners who have home values generally higher than the average HECM loan amount. Many jumbo reverse mortgages are held by homeowners in California and other areas where home values tend to trend higher than the national average.

In this article you will learn:

  • Differences between jumbo and FHA-insured reverse mortgages
  • Key benefits of a jumbo reverse mortgage
  • Risks and rewards of a jumbo reverse mortgage
  • History and current market outlook for jumbo reverse mortgages

Differences between jumbo and FHA-insured reverse mortgages

Jumbo reverse mortgages are proprietary loans, meaning they do not need to adhere to Department of Housing and Urban Development program rules. There are several lenders offering jumbo reverse mortgages, and their specific elements vary. Some private reverse mortgage programs offer features that the FHA-insured Home Equity Conversion Mortgage (HECM) product does not. These might include:

  • A minimum borrower age that is below the HECM minimum age of 62
  • The ability to borrow on a non-FHA-approved condo unit
  • The ability to take out the full amount of a lump sum payment upfront with fewer restrictions than under the HECM program

Another major difference is the jumbo’s lack of a mortgage insurance premium, a cost that applies to all HECM loans.

In most respects, however, jumbo reverse mortgages are very similar to HECMs. Jumbo programs typically require reverse mortgage counseling, they may offer different disbursement options such as lump sum and a jumbo line of credit option, and they allow borrowers to tap into their home equity while they live in the home.

Jumbo VS HECM Product Comparison

Compare FeaturesJumbo Reverse MortgageHECM Reverse Mortgage
Borrower Minimum Age6062
Maximum Lending Limit$4,000,000$822,375
Eligible PropertiesSingle Family (SRF), FNMA warrantable Condo, Townhome, 1-4 Units.Single Family (SRF), HUD Approved Condo, Townhome, 1-4 Units.
Lump Sum100%Limited*
Line of Credit 10 Year Draw Period Lifetime
Line of Credit Growth RateLimited to 7 YearsLifetime
Tenure Payment Plan NoYes
Low/No Closing CostsYesNo
Younger Spouse ProtectionNoYes
Use for Home PurchaseYesYes
*HECM initial lump sum limits at loan closing, and within the first 12 months of closing, cannot exceed the greater of 60% of the Principal Limit, or, Mandatory obligations plus 10% of the Principal Limit. Jumbo loans may take a 100% lump sum disbursement.

Key benefits of a jumbo reverse mortgage

The key benefit of a jumbo reverse mortgage is the ability to maximize loan proceeds for home values at higher levels. The exact percentages and figures will vary depending on several factors including the interest rates, borrowers’ ages, and the home value. However, many jumbos are available with a lending limit of $4 million or more — a significant increase over the HECM lending limit of ​​$822,375.

Jumbo Loan-to-Values

Current Rates4.90% (5.90% APR)6.50% (6.75% APR)6.99% (7.125% APR)
Borrower AgeLoan-to-valueLoan-to-value Loan-to-value
6031.2%

37.5%

42.1%



65
35.5%
43.2%
48.8%


7038.7%
46.6%



53.0%


7543.5%
50.8%


56.7%



8048.2%
54.5%


60.0%



8550.9%


57.4%



61.8%



9051.2%


58.5%


62.2%

LTV Tables as of 08/19/2021
Available Payout: Lump Sum or Line of Credit
*To calculate your loan amount, divide your home value into the LTV percentage. E.g., $2,000,000 value, age 70 at 6.99% rate = 53.5% LTV or $1,070,000 loan amount. Loan-to-values (LTV) are subject to change without notice & exceptions may be granted. (Contact us for details.)

Jumbo Reverse Mortgage Rates

Fixed RateAdjustable RateLending Limit
4.90% (5.90% APR)5.50% (4.99 Margin)$4,000,000
6.075% (6.075% APR)5.50% (5.124 Margin)$4,000,000
6.50% (6.625% APR)5.50% (5.125 Margin)$4,000,000
6.99% (6.99% APR)5.50% (5.240 Margin)$4,000,000
Fixed Rate Payment Options: Lump Sum
Jumbo APR Illustration: Assumes $1,000,000 loan amount, includes standard 3rd party closing costs.
Adjustable-Rate Payment Options: Lump Sum or Line of Credit
Index: 3-Mo. Libor
Lifetime Cap: 5% Over Start Rate

Risks and rewards of a jumbo reverse mortgage

For those considering a jumbo reverse mortgage, there are some pros and cons to consider – most of which apply to all reverse mortgages.

Jumbo reverse mortgage rewards:
  • Borrower protections. Jumbo reverse mortgages typically carry borrower protections similar to those offered under the HECM program, such as the non-recourse feature, which means the borrower will not owe more to repay the loan than the value of the home at the time of sale. Many jumbos offer non-borrowing spouse protections, as well. However, it’s important to ask the lender about the specific borrower protections offered since private loans are not subject to the same protections required by FHA.
  • Access to loan proceeds. While HECM loans have restrictions as to how much of loan proceeds can be accessed upfront, jumbos do not have these same requirements and often allow immediate access to the full loan proceeds, depending on the loan terms.
  • Higher loan amounts. Jumbo reverse mortgages allow qualifying borrowers to access their home value while they remain in the home — a key benefit for those who have enjoyed significant home appreciation over time but may be retired and on a fixed income.
Jumbo reverse mortgage risks
  • Lack of FHA insurance. Reverse mortgage jumbos are still non-recourse loans, but since they are not insured by FHA, they do not carry all the same borrower projections that HECMs do. It’s important to consult with trusted advisors and understand the loan terms and protections that are offered by your lender.
  • Impact to heirs’ inheritance. Like all reverse mortgages, jumbos allow borrowers to access their home equity while they remain in the home. By accessing and using this equity, borrowers will pass less equity on to their heirs than they would without the reverse mortgage. However, it’s important to note that if the borrower passes away, any equity that remains after the loan is paid off can pass on to the designated heirs.

History and current market outlook for jumbo reverse mortgages

Like all mortgage products, the jumbo lending environment changes based on many factors. Historically, there were many non-FHA reverse mortgages with different rates and terms. After the housing crash in 2008, most jumbos disappeared from the market. Based on low interest rates and changes to the FHA lending limit in recent years several jumbo products launched, offering a variety of rates, terms, and features.

If you are interested in a jumbo reverse mortgage, it’s important to ask about the specific terms offered by your lender, such as the amount that can be borrowed, the ways in which proceeds can be obtained, and the types of protections in place regarding non-borrowing spouses.

Jumbo FAQs

What is a jumbo reverse mortgage?

The jumbo reverse mortgage is a special type of loan that offers larger loan amounts than the federally insured HECM. Where federally insured HECM loans stop considering home values over the HUD lending limit of $822,375, a jumbo reverse mortgage will consider home values up to $10 million.

What lenders offer jumbo reverse mortgages?

Many lenders and brokers throughout the US offer jumbo loan options. At All Reverse Mortgage Inc, we offer a multitude of HECM, Jumbo & proprietary options to suit your individual needs.

What are the interest rates on Jumbo Reverse mortgages?

Current fixed interest rates are as low as 4.90% (5.3% APR), and adjustable rate programs are presently at 5.2% with a lifetime cap of 8.2%.

DISCLAIMER: Interest rates are subject to change without notice.

How much can you get from a jumbo reverse mortgage?

The percentage of your home’s value is available based on the youngest borrowers age and current interest rate environment. Generally, the older you are the more you will receive, as these loans are based on actuarial tables.

Can you get a jumbo reverse mortgage line of credit?

Yes. There are two exciting expansions on jumbo products in 2021 which include larger loan limits and the ability to utilize available proceeds as an open line of credit option. (Previously only a single lump sum disbursement was permitted on jumbo loans).

What is the difference between jumbo and proprietary loans?

Where jumbo reverse mortgages are proprietary by nature, proprietary reverse mortgages are not necessarily jumbo. “Jumbo” is a reference to a “large loan amount”. Some proprietary reverse mortgages are offered to home values as low as $400,000 where Jumbo programs usually benefit those high valued homes that are in excess of the HUD lending limit $822,375.

Additional Resources: 

Read my article published at Forbes.com “The Evolution Of Jumbo Reverse Mortgages”.