As we step into 2024, the landscape of reverse mortgages continues to evolve, with Jumbo Reverse Mortgages emerging as a significant component for homeowners with high-value properties.

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

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 the 2024 Jumbo Reverse Mortgage market.

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

ARLO teaching jumbo reverse mortgages

What is a Jumbo Reverse Mortgage?

While the HUD reverse mortgages are insured by the Federal Housing Administration (FHA) through its Home Equity Conversion Mortgage (HECM) program, there is also a rising number of Non-FHA reverse mortgages known as proprietary or jumbo reverse mortgages.

Among those Non-FHA reverse mortgages, the programs offering loan amounts higher than the FHA’s lending limit are typically called “jumbos.”  Like high dollar or 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 $1,149,825 lending limit set by FHA.

Jumbo reverse mortgages are available to qualifying homeowners with higher home values than can be served with 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.

Differences between Jumbo and FHA-insured reverse mortgages

Several lenders are offering jumbo reverse mortgages, and their specific elements vary.  Jumbo reverse mortgages are proprietary loans, meaning they do not need to adhere to Department of Housing and Urban Development program rules.

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 (when state lending laws allow)
  • The ability to borrow using a Non-FHA-approved condo unit as collateral
  • The ability to take out the full amount of a lump sum payment at closing with fewer restrictions than under the HECM program

Another significant difference is that jumbo reverse mortgages have no mortgage insurance premiums, as this cost applies only to FHA-insured 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 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.

Key Benefits

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 a lending limit of $4 million or more — a significant increase over the HECM lending limit of ​​$1,149,825.

Jumbo Reverse Mortgage Loan-to-values (LTV)

Borrower AgeLoan-to-valueLoan-to-valueLoan-to-value
Rate 9.375%9.990%9.740%
5521.5%29.5%29.5%
6023.0%31.0%31.0%
6524.7%32.7%32.7%
7027.6%35.6%35.6%
7532.1%40.1%40.1%
8037.0%45.0%45.0%
8542.8%50.8%50.8%
9043.4%51.4%51.4%
LTV Tables as of: 09/07/2023
Available Payout: Lump Sum
*Divide your home value by the LTV percentage to calculate your loan amount.
E.g., $2,000,000 value, age 70 = 35.6% LTV or $712,000 loan amount.

Jumbo Reverse Mortgage Rates

Fixed RateAdjustable RateLending Limit
9.375% (9.869% APR)11.565% (6.625 Margin)$4,000,000
9.740% (10.268% APR)11.690% (6.750 Margin)$4,000,000
9.990% (10.542% APR)11.815% (6.875 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: 12-Mo. CMT
Lifetime Cap: 5% Over Start Rate

Risks and Rewards

For those considering a jumbo reverse mortgage, there are some pros and cons – 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 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 offered since private loans are not subject to the same protections required by FHA.
  • 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 home value.  At the same time, 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 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.
  • 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, 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

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.  Several jumbo products were launched based on low interest rates and changes to the FHA lending limit in recent years, offering various rates, terms, and features.

Suppose you are interested in a jumbo reverse mortgage.  In that case, it’s important to ask about the terms offered by your lender, such as the amount that can be borrowed, how proceeds can be obtained, and the types of protections regarding non-borrowing spouses (if applicable).

Top FAQs

Q.

What is a jumbo reverse mortgage?

The jumbo reverse mortgage is a particular 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 $1,149,825, a jumbo reverse mortgage will consider home values up to $10 million.
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 interest rates on Jumbo Reverse mortgages?

All loan types, including Jumbo Reverse Mortgages, are subject to market fluctuations and can change anytime without notice.  You should check our daily rate sheet to check current pricing on any given day.
Q.

How much can you get from a jumbo reverse mortgage?

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

Can you get a Jumbo reverse mortgage line of credit?

Yes.  There are two exciting expansions on jumbo products in 2024, 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 owner of the property, you are responsible for the payment of the 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 at which you spent most of the time, the one to which your driver’s license is connected, and 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.  The fixed-rate loans are fixed for life, and the adjustable-rate loans will adjust their rates by 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).

Additional Resources:

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