Understanding Jumbo Reverse Mortgages
in San Jose, California
If you’re over the age of 62, a reverse mortgage in San Jose can be a good way to purchase a new home or add to your retirement (either through a lump sum, a regularly scheduled payout, a line of credit, or some combination of these three). Unfortunately, not everyone qualifies for a reverse mortgage insured by the Federal Housing Administration (FHA). If your home does not qualify, there’s still a way to get a loan, if you need one: a jumbo reverse mortgage. A jumbo reverse mortgage is similar to a reverse mortgage, but there are some key differences.
Jumbo Reverse Mortgage Basics
A jumbo reverse mortgage, also referred to as a proprietary reverse mortgage, is an alternative for borrowers who either: 1. do not qualify for an FHA-insured loan or 2. Need more money than a HECM can provide. The max loan amount for a FHA loan is $509,737.50. The max loan for a Jumbo reverse mortgage is $6,000,000. You may not qualify for a FHA insured HECM. This could happen for a few reasons. Often, the home doesn’t qualify because it is a condo or other planned urban development that has not received FHA approval. More often, the loan amount is too high for an FHA-approved loan. For such cases, lenders offer these specialized reverse mortgage services.
No Federal Insurance
Because a jumbo reverse mortgage is made for borrowers who do not qualify for an FHA loan, it is not insured by the FHA. And since a jumbo reverse mortgage is not insured, you do not have to pay mortgage insurance premiums (MIPs) on the loan. This is a potential benefit to you, as it eliminates these insurance costs associated with a traditional reverse mortgage. Both the HECM and the Jumbo are non recourse loans, so the same protections are offered.
More Borrowing Power
The FHA places a lending limit of $679,650 on a traditional one-family home reverse mortgage loan. Because a jumbo reverse mortgage is not insured by the FHA, these lending limits do not apply. Proceeds from a jumbo reverse mortgage can be as high as $ 500,000 to $6 million, a significant increase in borrowing power. Of course, this loan amount increase depends on the value of your home.
While a jumbo reverse mortgage can be appealing, and in fact beneficial, it is not for everyone. Since jumbo reverse mortgages can yield higher loan amounts, the costs to the borrower can increase significantly as well. After all, reverse mortgages are loans, so they accrue interest until the loan term ends. And with a higher loan amount comes higher interest costs. Make sure to take that fact into account.
Another factor to take into account is that jumbo reverse mortgages were designed primarily for high-value residences—condos over $500,000 or homes over about $1.2 million—and may not work well for lower value dwellings. If you can’t get a reverse mortgage because your dwelling is not FHA-approved see what you can do to get FHA approval, or consider a Jumbo.
If you’re considering either a reverse mortgage or a jumbo reverse mortgage, assess your financial situation and plan for your costs. A reverse mortgage calculator can help you determine what kind of reverse mortgage you can afford, and how much money you can afford to borrow. Apply the same cost-benefit analysis to this kind of loan that you would to a home or auto loan.
Are you in San Jose and considering a reverse mortgage? Apply today to get started on your loan.