This is the time to look at the All-New 2020 JUMBO reverse mortgage programs.
Traditionally, most borrowers, ages 62 and over, have benefited from the HUD Home Equity Conversion Mortgage (HECM or “Heck-um”).
The reverse mortgage program has undergone some rough years.
The Department of Housing and Urban Development (HUD) has made one move after another, making it harder to qualify and lowering Principal Limits (how much you receive).
The changes that took effect as of October 2, 2017 have had a two-fold effect; lower Principal Limits and lowering the interest rate floor provided borrowers even less money.
Expansion of Jumbo & Proprietary Programs
The recent losses to the HECM program stem from borrowers who could not afford their homes, even after they received the reverse mortgage; those who defaulted on their taxes and insurance; and plummeting market values did not help.
The entire Mortgage Insurance Fund, which affects all borrowers who rely on federally-insured loans, was at risk and HUD responded.
One of the silver linings from the changes HUD made is the re-emergence of jumbo & Proprietary Reverse Mortgage programs.
For most borrowers, jumbo programs simply did not make sense.
Most often, borrowers with homes worth less than $765,600 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 proprietary loans to enter the market again, offering a product that makes sense for borrowers for with home values at $765,600.
With interest rates coming back down again over the past several months, the jumbo Reverse Mortgage is really starting to look better and better for a lot of borrowers.
Fees have dropped and many borrowers are finding that the range of products being offered are starting to really appeal to homeowners with higher valued homes.
Lower Closing Costs
Upfront and ongoing monthly mortgage insurance are not required with the jumbo program increasing the programs appeal.
The upfront mortgage insurance premium charged on a HECM loan is formulated at 2% of your home value with a lending limit of $765,600.
That’s an immediate closing cost savings of $15,312.00 when directly comparing the financed closing costs of a HECM to jumbo program.
Lower Interest Rates
The higher jumbo rates have come down from a previous 7.50% to as low as 4.99% and requires no additional monthly insurance charges as required on all government 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.
Jumbo & Proprietary Rates
Fixed Rate Adjustable Rate Lending Limit
4.99% (5.35% APR) 5.33% (3.875 Margin) $4,000,000
5.75% (6.00% APR) 5.45% (3.99 Margin) $4,000,000
5.875% (6.00% APR) 5.58% (4.125 Margin) $4,000,000
5.95% (6.125% APR) 5.70% (4.250 Margin) $4,000,000
6.75% (6.875% APR) 5.82% (4.375 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, Line of Credit, Term.
Index: 3-Mo. Libor
Lifetime Cap: 3% Over Start Rate
Much Larger Payouts
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 of $1,500,000 for the loan to make sense.
The jumbo loan works for many more borrowers than it did previously.
Jumbo Fixed Rate Loan-to-Values
Current Rates 4.99% (5.35% APR) 5.95% (6.00% APR) 6.99% (7.00% APR) 7.25% (7.375% APR)
Borrower Age Loan-to-value Loan-to-value Loan-to-value Loan-to-value
Available Payout: Lump Sum
*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 = 46.4% LTV or $928,000 loan amount.
Loan-to-values (LTV) are subject to change without notice & exceptions may be granted. (Contact us for details.)
Jumbo Adjustable Rate Loan-to-Values
Current Rates 5.92% 5.92%
Borrower Age Loan-to-value Loan-to-value
Available Payout: Line of Credit or Lump Sum
*To calculate your loan amount divide your home value into the LTV percentage.
E.g., $2,000,000 value, age 70 at 5.92% rate = 47.4% LTV or $948,000 available line of credit.
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 $765,600
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).
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.
*Condominiums do not require any special HUD condo approval over $400,000 property values.
Top 5 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 stops considering home values over the HUD lending limit of $765,600, 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 2020 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 of a jumbo and proprietary loans?
Where jumbo reverse mortgages are proprietary by nature, proprietary reverse mortgages are not necessarily jumbo. “Jumbo” is a reference of a “large loan amount”.
Some proprietary reverse mortgages are offered to home values as low as $400,000 where Jumbo programs usually benefit those with home values that are in excess of the HUD lending limit $765,600.
New Jumbo Features Being Released Constantly
The jumbo reverse mortgage was only available as a fixed rate full draw for quite a while and this was a bone of contention for many borrowers.
As the product has been reintroduced and has had the chance to become more accepted in the secondary market (to those who purchase the mortgage-backed securities), more options of partial draws, different rate options, etc. have made their way back into the product offerings.
Keep checking back to see what is currently available as it’s only been getting better!
Here’s a list of present day of available Jumbo programs: