As we enter 2024, the landscape of reverse mortgages continues to evolve, with jumbo reverse mortgages, also known as proprietary or private reverse mortgages, emerging as a significant component for homeowners with high-value or non-conforming/non-FHA insurable properties.

In this article, we will dissect the critical differences between jumbo and FHA-insured reverse mortgages, clarifying why and when a jumbo reverse mortgage could be the right choice for you.  We will also dive into the key benefits alongside a balanced discussion of these loans’ potential risks and rewards.

Whether you are a homeowner, a financial advisor, or simply interested in the latest trends in mortgage finance, this article will equip you with the knowledge about the lenders, rates, and loan limits pertinent to 2024’s reverse mortgages.

In this article, you will learn:

  • Differences between jumbo/proprietary reverse mortgages (hereafter referred to solely as jumbo reverse mortgages) 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

ARLO teaching jumbo reverse mortgages

What is a Jumbo Reverse Mortgage?

A jumbo reverse mortgage is a type of reverse mortgage for homeowners with high-value properties or properties that may not conform to HUD/FHA insurance requirements.  While traditional reverse mortgages are insured by the Federal Housing Administration (FHA, which is a division of the Department of Housing and Urban Development or HUD, so FHA and HUD will be used interchangeably) through its Home Equity Conversion Mortgage (HECM) program, jumbo reverse mortgages are not.

Instead, they are known as proprietary or Non-FHA reverse mortgages.  The jumbo programs also have their own underwriting requirements, so that does not mean that any property that cannot be used for FHA financing can be used for the jumbo programs.  The private programs set their own underwriting parameters, and therefore, they will accept many property, borrower, and loan scenarios that the FHA underwriting requirements may not accept.

Jumbo reverse mortgages offer loan amounts much higher than the FHA.  The FHA program limits borrowers to a percentage of the HUD maximum lending limit or the appraised value, whichever is less, and the current lending limit is $1,149,825.  Based on interest rates and the borrowers’ ages, with the FHA program, the actual loan amount maximum for borrowers is much less than the current maximum loan amount of $4,000,000 for jumbo programs.  This means homeowners with more valuable homes can borrow more money than they could with a standard HECM loan that would be capped at a percentage of $1,149.825, even for properties with values that far exceed the FHA limit of $1,149,825.

These loans are designed for homeowners with higher home values, such as those in states like California, where property prices often exceed the national average.  If your home is worth more than what an average HECM loan accommodates, a jumbo reverse mortgage could be a suitable option for you.  However, we will also discuss some situations where the jumbo program might work best for borrowers with properties valued at or below the HECM limit due to borrower or property parameters.

Primary Advantage of a Jumbo Reverse Mortgage

The key benefit of a jumbo reverse mortgage is the ability to maximize loan proceeds for a home valued higher than the HUD maximum of $1,149,825.  The exact percentages and figures will vary depending on several factors, including interest rates, borrowers’ ages, and home value.

Sometimes, homes valued slightly above the HUD limit will still benefit from the HECM program.  However, many jumbos are available with loan amounts of $4 million or more (property values sometimes approaching $10,000,000) — a significant increase over the HECM lending limit of ​​$1,149,825.

Jumbo vs. HECM Product Comparison

Compare FeaturesJumbo Reverse MortgageHECM Reverse Mortgage
Borrower Minimum Age5562
Maximum Lending Limit$4,000,000$1,149,825
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.

Understanding Jumbo Reverse Mortgages

Several lenders offer jumbo reverse mortgages, and the details can vary between lenders.  These are proprietary loans, meaning they do not need to follow the rules of the Department of Housing and Urban Development (HUD).

Jumbo reverse mortgages can offer unique features that FHA-insured Home Equity Conversion Mortgages (HECM) do not, such as:

  • Allowing borrowers who are younger than the HECM minimum age of 62 (where state laws permit)
  • Enabling the use of a Non-FHA-approved condo unit as collateral
  • Providing the option to take out the full loan amount as a lump sum at closing with fewer restrictions than HECMs

A key difference is that jumbo reverse mortgages do not require mortgage insurance premiums, which are a cost associated only with FHA-insured loans.

Despite these differences, jumbo reverse mortgages are similar to HECMs in many ways.  They typically require reverse mortgage counseling and may offer various disbursement options, like a lump sum or a line of credit.  These loans allow borrowers to access their home equity while continuing to live in their homes.

2024 Jumbo Reverse Mortgage Loan-To-Value Chart (LTV)

Borrower AgeLoan-to-value (9.690% & 9.990%)Loan-to-value (8.990%)
5531.5%26.5%
5631.8%26.8%
5732.0%27.0%
5832.3%27.3%
5932.7%27.7%
6033.0%28.0%
6133.3%28.3%
6233.6%28.6%
6333.9%28.9%
6434.2%29.3%
6534.7%29.7%
6635.2%30.2%
6735.8%30.8%
6836.3%31.3%
6936.9%31.9%
7037.6%32.6%
7138.4%33.4%
7239.2%34.2%
7340.0%35.0%
7441.1%36.1%
7542.1%37.1%
7643.1%38.1%
7744.2%39.2%
7844.5%39.5%
7945.8%40.8%
8047.0%42.0%
8148.4%43.4%
8249.8%44.8%
8351.2%46.2%
8451.8%46.8%
8552.8%47.8%
8652.8%47.8%
87 - 10053.4%48.4%
This chart reflects the relationship between a borrower's age and the percentage of home value that can be accessed through a jumbo reverse mortgage, as of March 16, 2024. To calculate your loan amount, divide your home's value by the LTV ratio. For example, if your home is valued at $2,000,000 and you are 75 years old, the LTV ratio would be 42.1%. This results in a loan amount of $842,000.

Jumbo Reverse Mortgage Rates

Fixed RateAdjustable RateLending Limit
8.990% (9.075% APR)11.745% (6.625 Margin)$4,000,000
9.690% (9.775% APR)11.870% (6.750 Margin)$4,000,000
9.990% (10.546% APR)11.995% (6.875 Margin)$4,000,000
Fixed Rate Payment Options: Lump Sum
Jumbo APR Illustration: Scenario is for a 70 year old borrower in California with a $1,000,000 loan amount, includes standard 3rd party closing costs.
Adjustable-Rate Payment Options: Lump Sum or Line of Credit
Index: 12-Mo. CMT
Lifetime Cap: 5% Over Start Rate

Pros & Cons of Jumbo Reverse Mortgages

For those considering a jumbo reverse mortgage, there are some pros and cons – most of which apply to all reverse mortgage programs, private or FHA-insured.

Pros
  • 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 home’s value 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 and features offered on any programs you are researching since private loans may not necessarily include a specific feature that is important to you (i.e., the draw period we discussed earlier is only 10 years on the jumbo product).
  • Access to loan proceeds.  While HECM loans restrict how much 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 loan amounts as they are available based on their full home value.  For owners of high-valued homes, their loan is determined by their property value.  They are not capped at a percentage of the HUD lending limit even though their property value far exceeds that lending limit.
Cons
  • Lack of FHA insurance. Reverse mortgage jumbos are still non-recourse loans, but since FHA does not insure them, 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 offered by your lender.  This is also why draw periods are limited to 10 years (borrowers taking full draws or substantially full draws at closing eliminate this concern).
  • Impact on 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 (especially earlier in the loan term), 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 be passed on to the designated heirs.

History and Current Market Outlook

The jumbo reverse mortgage market has evolved and has been influenced by various factors.  After the 2008 housing crash, many jumbo reverse mortgage products disappeared.  However, several new jumbo products have been introduced in recent years, offering different rates, terms, and features, thanks to low interest rates and changes to the FHA lending limit.

If you are considering a jumbo reverse mortgage, comparing lenders about the specific terms they offer is essential.  Important details include the maximum amount you can borrow, how you will receive the loan proceeds, and the protections available for non-borrowing spouses, if applicable.  Understanding these factors will help you make an informed decision.

Jumbo FAQs

Q.

What is a jumbo reverse mortgage?

A jumbo reverse mortgage is a proprietary loan designed for homeowners seeking amounts larger than those provided by the federally insured Home Equity Conversion Mortgage (HECM).  Unlike HECM loans, which only recognize home values up to the HUD lending limit of $1,149,825, jumbo reverse mortgages can accommodate property values as high as $10 million.  This makes them attractive for individuals with high-value homes looking to leverage their equity.
Q.

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, and proprietary options to suit your individual needs.
Q.

What are the current interest rates on jumbo reverse mortgages?

Interest rates as of 5/22/2024 on jumbo reverse mortgages are as follows:

  • Fixed Rates: Range from 8.990% (9.075% APR) to 9.690% (9.775% APR)
  • Adjustable Rates: Range from 11.765% (6.625 Margin) to 12.015% (6.875 Margin)

All these rates come with a lending limit of $4,000,000.

Q.

How much can you get from a jumbo reverse mortgage?

The amount you can receive from a jumbo reverse mortgage depends on your age and your home’s value, according to the 2024 Jumbo Reverse Mortgage Loan-to-Value (LTV) Chart.  The LTV percentage increases with age.  For instance, if you are 75 years old and your home is valued at $2,000,000, the LTV ratio is 42.1%.  Applying this ratio, you could be eligible for a loan amount of approximately $842,000.  To find out how much you could get, multiply your home’s value by the LTV percentage corresponding to your age from the chart.
Q.

Can you get a jumbo reverse mortgage line of credit?

Yes.  In 2024, Jumbo Products will experience two exciting expansions, including 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.)
Q.

What is the difference between jumbo and proprietary loans?

“Jumbo” is a reference to a “large loan amount.” Where jumbo reverse mortgages are proprietary by nature, proprietary reverse mortgages are not necessarily jumbo.  Some proprietary reverse mortgages are offered to home values as low as $450,000.  In contrast, Jumbo programs usually benefit those high-valued homes more than the HUD lending limit of $1,149,825.
Q.

How long does it take to take out a jumbo reverse mortgage?

Most jumbo loans usually take 30 days.  If you are in an area where appraisers are scarce or highly backed up, or if your value is over $2,000,000 requiring 2 appraisals, I would tell you to plan for 60 days at this time.  Suppose we can get all the third-party services to act quickly.  In that case, we can close much faster than this.  Still, too many times, we have been held up by the lack of appraisers and the ability to have the services returned in less than 30 days and sometimes longer.
Q.

Will the lender pay the property tax and insurance with a jumbo reverse mortgage?

As the property owner, you are responsible for paying taxes and insurance on the home.  Since there are no payments that you regularly make on a reverse mortgage, lenders cannot impound amounts monthly to pay the payments when they are due.  The only way a lender could pay the taxes and insurance for borrowers on reverse mortgages is to set aside funds to cover these charges for life.  HUD has a process to do this, but the Life Expectancy Set Aside (LESA) can amount to tens of thousands of dollars.
Q.

With a jumbo reverse mortgage, are the beneficiaries liable if the property is “underwater?”

Reverse mortgages are still non-recourse loans, jumbo, or HECM.  The lender can only look to the property as their security for repayment of the debt.
Q.

Can you have more than one jumbo reverse mortgage?

No.  You can only have one reverse mortgage at this time.  The loan must be on the home you use as your primary residence.  That would be determined by the home where you spend most of your time, the one to which your driver’s license is connected, all your banking accounts, where you are listed as living on your tax returns, etc.
Q.

Are jumbo reverse mortgage interest rates fixed for the life of the loan?

Like traditional loans, both fixed-rate and adjustable-rate reverse mortgage loans are available.  Fixed-rate loans are fixed for life, and adjustable-rate loans will adjust their rates according to the loan terms.
Q.

Can I rent rooms privately, with a rental company, or Airbnb if we have a jumbo reverse mortgage?

Jumbo loans are private reverse mortgages and are not all subject to the same rules as the HUD HECM mortgage.  Each investor who offers the loans makes their own rules; therefore, you need to verify the restrictions of your loan with your loan documents.  Check the legal documents to see if this topic is covered and the restrictions.  If you are still determining after reading everything, you can always contact the lender directly and request them to send you the specific document(s) that deal with any renters in your home while you live there, and you can always ask an attorney to review them.  HUD is okay with renting a room month-to-month if the property is not used for transient occupancy (i.e., Airbnb rental).

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