Jumbo Reverse Mortgages | What They Won't Tell You

Seniors looking into reverse mortgages have quite a few choices, and one that stands out is the jumbo reverse mortgage. It’s made for homeowners with high-value properties. But there’s a lot more going on behind the scenes.

In this article, I'll break down everything about jumbo reverse mortgages that typically tend to slip through the cracks. So, if you want a reality check to help you make the right mortgage decision, keep reading.

What Is a Jumbo Reverse Mortgage & How does it work?

Now, you might already know about regular reverse mortgages, where older homeowners can tap into the equity of their homes without making monthly payments.

A jumbo reverse mortgage is kind of like the big brother of regular reverse mortgages, also known as private or proprietary reverse mortgages.

It’s essentially a type of home equity loan available to homeowners with high-value properties. These mortgages come from private lenders and are for people with really valuable homes that exceed the government's limits of $1,149,825.

You can cash in on more money than you would with regular mortgages and choose how to receive funds - either by a lump sum, monthly payments, or a line of credit.

Jumbo Reverse Mortgage: Borrowing Limits Explained

Your borrowing limit depends on three factors: how much your home is worth, how much of it you already own (that's your equity), and your age.

The maximum you can get is as high as $4 million. However, to be eligible for a loan of that size, you need to have at least that much equity in your home and be able to handle such a large debt, because let's face the truth - reverse mortgages are not free money.

Qualification Requirements in 2024: Who’s It For?

Jumbo reverse mortgage requirements are not very lenient as they’re not backed by the government. The main reason is that your lenders bear higher risk. So here’s how you can qualify for a jumbo reverse mortgage in 2024:

• Income verification

You'll need to show proof of income, typically by providing two years of tax documents or other income paperwork. Additionally, make sure you've got enough savings to cover at least six months of mortgage payments.

• Creditworthiness

Aim for a credit score of 700 or higher. Lenders are hesitant to approve jumbo loans for individuals with lower credit scores.

• Debt-to-income ratio (DTI) & Loan-to-value ratio

Keep your monthly debt payments below 43% to 45% of your income. For jumbo loans, lenders prefer a lower DTI, ideally 36% or less.

The loan-to-value ratio compares the loan amount to the property's value. For jumbo loans, lenders often want the LTV to be 80% or lower

• Down payment

Expect to make a substantial down payment of at least 20% of the property's purchase price due to stricter loan-to-value (LTV) ratio requirements for jumbo loans.

If you meet these qualification requirements, a jumbo reverse mortgage could be worth exploring.

Jumbo Reverse Mortgage Repayment

So, when can you repay your jumbo reverse mortgage? Is there a set date? Let’s find out!

Usually, you don't have to repay the loan while you're living in the home. Jumbo reverse mortgages are repaid when certain events happen, not on a set date. Here’s when repayment starts:

1. • ➙ Upon your passing

   • ➙ When you sell the home

   • ➙ You don't live in the home for 12 months in a row

   • ➙ When transferring the home's title to someone else

   • ➙ You stop paying property taxes or homeowners insurance

   • ➙ The home isn't your main residence any more

   • ➙ The home falls apart, and you don't fix it up

Now that we've discussed all the benefits that jumbo reverse mortgages offer, let's determine if they'll truly help you or add more financial stress during retirement.

5 Key Considerations of Jumbo Reverse Mortgage

Before you get too excited about a jumbo reverse mortgage, there are a few important things to consider. First off, check out your financial situation carefully. Then, look into all the choices you have available.

• Your Financial Situation

Take a good look at your finances. Are you ready for the responsibility of a jumbo reverse mortgage? Make sure you're clear on how it'll impact your financial future.

• Loan Terms and Conditions

Understand the terms and conditions of different proprietary reverse mortgage lenders. What are the interest rates, fees, and repayment terms? Make sure you're comfortable with all the details.

• Your Home's Value

Consider your home's value. Is it worth enough to qualify for a jumbo reverse mortgage? Make sure you know how much you could potentially borrow.

• Your Future Plans

Think about your future plans. Do you plan to stay in your home long-term, or might you want to move in the near future? Consider how a jumbo reverse mortgage fits into your future goals.

• Explore Alternative Options

Are there other ways to achieve your financial goals without taking out a jumbo reverse mortgage? Make sure you've considered all your options before making a decision.

Pros & Cons of Jumbo Reverse Mortgage

Here's another way to assess whether jumbo reverse mortgages are right for you.

✅Pros	Cons❌
Due to the non-recourse feature, borrowers can’t owe more than the home's value when repaying the loan upon sale.	While jumbo reverse mortgages are still non-recourse loans, they lack the FHA insurance that HECM loans have.
Many jumbo loans also provide protections for non-borrowing spouses. However, it's essential to ask the lender about specific protections.	This means they may not offer the same level of borrower protection. It's crucial to carefully review the loan terms and protections provided by the lender.
Jumbo reverse mortgages typically allow immediate access to the full loan amount, depending on the loan terms.	By using the equity, borrowers may leave less equity for their heirs.
They help qualifying borrowers access a larger portion of their home's value while continuing to live in the home.

The Bottom Line: What You Need to Remember?

So, what's the main takeaway? Jumbo reverse mortgages can be a helpful financial tool for homeowners with a lot of equity in their homes. They offer immediate cash by offering flexibility, security, and peace of mind during retirement.

But it's important to understand the terms, consider the pros and cons, and talk to a reverse mortgage loan officer before deciding. Take your time, ask questions, and choose the option that's best for you and your family.