Expansion of Jumbo & Proprietary Reverse Mortgages
The Mortgage Insurance Fund, which affects all borrowers who rely on federally-insured reverse mortgage loans, has been at risk and HUD responded with a series of changes that limit exposure to future losses.
One of the silver linings from the changes HUD made is the re-emergence of Jumbo Reverse Mortgage products.
For most borrowers in the past, jumbo programs simply did not make sense.
Most often, borrowers with homes worth less than $822,375 would typically receive as much or more money on HUD programs with much lower rates.
The recent changes made by HUD have made it easier for Jumbo reverse mortgages to enter the market again, offering a product that makes sense for borrowers with home values over the HUD HECM national lending limit of $822,375.
Jumbo rates have dropped and many borrowers are finding that the range of jumbo products being offered are starting to really appeal to homeowners with higher valued homes.
Jumbo VS HECM Product Comparison
Compare Features Jumbo Reverse Mortgage HECM Reverse Mortgage
Borrower Minimum Age 60 62
Maximum Lending Limit $4,000,000 $822,375
Eligible Properties Single Family (SRF), FNMA warrantable Condo, Townhome, 1-4 Units. Single Family (SRF), HUD Approved Condo, Townhome, 1-4 Units.
Lump Sum 100% Limited*
Line of Credit 10 Year Draw Period Lifetime
Line of Credit Growth Rate Limited to 7 Years Lifetime
Tenure Payment Plan No Yes
Low/No Closing Costs Yes No
Younger Spouse Protection No Yes
Use for Home Purchase Yes Yes
Jumbo Reverse Mortgages Offer Rates & Costs
The higher jumbo rates have come down from a previous 7.50% to as low as 4.95% (5.95% APR) and require no additional monthly insurance charges as required on all government insured HECM plans.
Monthly mortgage insurance is not interest, but it accrues in the same manner, so you save by not having to pay it on the jumbo loan.
When you remove the monthly mortgage insurance which HUD charges at .50% and consider the new lower offered rates, the jumbo reverse mortgage options have become incredibly attractive.
Upfront and ongoing monthly mortgage insurance are not required with the jumbo program increasing the program’s appeal.
The upfront mortgage insurance premium charged on a HECM loan is formulated at 2% of your home value or lending limit, whichever is less.
That can equate to an immediate closing cost savings of $16,447.50 when directly comparing the financed closing costs of a HECM to jumbo program.
Jumbo Reverse Mortgage Rates
Fixed Rates Adjustable Rates Lending 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
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
Jumbo Reverse Mortgages Have Higher Loan-To-Values
The jumbo reverse mortgage provides better loan-to-value ratios, which means borrowers receive more money as a percentage of their home value.
In most cases, it no longer takes a home value over $1,000,000 for the loan to make sense.
The jumbo programs make a lot more sense for many when you consider all the improvements; lower rates and fees, higher loan amounts and underwriting enhancements are a benefit to seniors with property values at or above $822,375
It is safe to say the new jumbo products will not be the solution for all borrowers, but it most definitely gives a senior more options and the ability to choose whether or not they wish to capitalize on a program that looks at the full value of their home (up to $4 million).
Current Rates 4.90% (5.90% APR) 6.50% (6.75% APR) 6.99% (7.125% APR)
Borrower Age Loan-to-value Loan-to-value Loan-to-value
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.)
Eligible Property Types & Other Considerations
Jumbo programs are eligible on single family residences, *condominium properties or two-unit properties, as long a borrower occupies one unit.
Properties that were listed for sale within the last six months of application are subject to evidence, such as a Multiple Listing Service (MLS) cancellation, indicating that the subject property is no longer listed for sale.
Non-borrowing spouses are eligible but are not subject to the same protections offered with a HECM.
Therefore, if there is a NBS, they should strongly consider a HECM loan.
The jumbo allows a NBS with additional requirements, such as a videotaped interview session with the borrower’s attorney and a court reporter to ensure all parties understand the transaction.
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 4.99% (5.3% APR), and adjustable rate programs are presently 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.
Here’s a list of currently available Jumbo programs: