You’ve found your dream home and the cost is $700,000. You’re 65 and you really don’t want a monthly mortgage payment. You sold your current home and have the proceeds available for your new home. This is the perfect place for your retirement. You remember reading about a reverse mortgage and that you can purchase a home using this product. Or, maybe you would like to access the equity in the house you have lived in for the last 25 years – the one that has grown in value to $900,000. Then, you find out that the Home Equity Conversion Mortgage (HECM), the FHA insured program, is limited to a value of $625,000. This loan cap limits your access to a portion of the equity in your home. What options do you have?
The HECM program is still available, but since it is capped at $625,000, that is the maximum value of the property that can be considered. Is there any way to consider the entire value of your home? Yes. This can be done with a jumbo reverse mortgage.
The jumbo reverse mortgage virtually disappeared with the housing downturn. Home values dropped leaving many without the higher property values and investors unwilling to purchase pools of jumbo reverse mortgages. As housing markets recover, the jumbo reverse mortgage is beginning to see renewed interest.
The first thing you need to know is that a jumbo reverse mortgage loan is not insured by FHA (like the smaller, HECM loans are). It is a proprietary reverse mortgage with no government backing. There are a few programs available from private lenders who will consider property with values up to $6 million. The HECM loan requires FHA mortgage insurance, while the jumbo programs do not require mortgage insurance – eliminating one expense of the loan.
You also need to know that the interest rates will be higher than a HECM loan. The larger loan values and the loss of mortgage insurance make a jumbo reverse mortgage a riskier investment. Interest rates will be higher to reflect the greater risk to the lender and investor.
There are a few other differences in the programs, but many facets are the same as the HECM:
- proceeds are tax free (it is a loan; it is not considered income)
- repayment is not required until the last borrower permanently leaves the property
- taxes, hazard insurance, and homeowners’ association dues are the responsibility of the homeowner and must be kept current; the property must be kept in good repair
- proceeds may be used for any legal purpose
- the home must be your primary residence
There is much more that you will need to know than can be relayed in this short blog if you are considering a jumbo reverse mortgage. I can meet with you to thoroughly explain the program.
Planning for this time of your life requires investigating just what options are available to help make this stage a better life for you and your family. The jumbo reverse mortgage offers one more tool in planning for a truly golden age in your life.
D. Charlene Turner
NMLS#456052 (www.nmlsconsumeraccess.org)
MLO license #8957VA; #152593NC
Tidewater Home Funding LLC
1108 Eden Way N.
Chesapeake, VA 23320
cturner@tidewaterhomefunding.com
Ph (757) 366-8690 ext. 337; Fax (757) 366-0566; Cell (757) 285-2563
Sources:
Jumbo Reverse Mortgage and Proprietary Reverse Mortgage Loans http://www.newretirement.com/Services/Jumbo-Reverse-Mortgage.aspx
Alexis Leondis Jumbo Reverse Loans Revived for U.S. Seniors: Mortgages http://www.bloomberg.com/news/articles/2014-08-22/jumbo-reverse-loans-revived-for-u-s-seniors-mortgages