Jumbo Reverse Mortgage – Jumbo Reverse Mortgages vs HECM Reverse Loans
The FHA insured Home Equity Conversion Mortgage (a.k.a. Reverse Mortgage) is by far the most widely used reverse mortgage program in the United States (at the time this was published in January 2017). In fact, it’s virtually the only option right now for a home equity conversion mortgage. At one point in the 2000’s there were a handful of options available (FHA version, Fannie Mae, and several proprietary products).
At this point in time there is the FHA version and a jumbo version. While there may be many lenders and brokers offering a jumbo reverse mortgage, as of now the source of the money only comes from two places really.
Here’s a highlight of the differences between the FHA version and the Jumbo reverse mortgages:
Amount you can get:
FHA – The maximum funds available ranges from $333,342 and $477,112. The aforementioned potential maximum loan amounts are for a 62 year old and a 90 year old respectively (with a home value of $636,150 or more). The amount you get moves on a sliding scale. The older you are, the higher the percentage you get (at age 62 you get 52.4% of the appraised value while at age 90 you get 75% of the home’s appraised value).
Jumbo – With the Jumbo, you can get up to $2,250,000.00. The amount you get is much more conservative. For example, a 62 year old only gets 21% of the appraised value. Again, the amount you get moves on a sliding scale. The older you are, the more you get. The jumbo maxes out at age 87 where you can get 50% of the appraised value.
Differences pertaining to condominiums:
FHA – In order to do an FHA insured reverse mortgage on a condominium, the condominium’s Home Owner’s Association needs to be FHA approved.
Jumbo – This type of reverse mortgage can potentially be done on a condominium whose HOA is NOT FHA approved, but it will have a slight reduction in the percentage of funds one can access.
Fixed vs. Line of Credit
FHA – With the FHA version of the reverse mortgage, there are a few options. A couple of them come in the form of a Line of Credit, which is always in the form of a variable rate. Even with a traditional forward loan, credit lines are always a variable rate and never fixed.
FHA also has a fixed rate of interest option. Most people don’t opt for this at this point in time because it usually reduced the amount of funds available (exceptions may apply).
Jumbo – The only option available with the jumbo home equity conversion mortgage is a fixed rate option. This has several implications. First, the fixed rate is higher than the one available for the FHA version. Second, you cannot choose the loan amount. Basically, the amount you get is solely dictated by your date of birth and appraised value. You cannot choose to take a lower amount. You basically get all the funds up front in a lump sum.
FHA – The FHA Reverse Loan is available in all 50 states, Guam, Puerto Rico, and the U.S. Virgin Islands (the company and loan officer originating the loan needs to be licensed there though).
Jumbo – At present (January 2017), the jumbo is ONLY available in AZ, CA, CO, CT, DC, FL, HI, IL, LA, NJ, OR, PA, RI, SC, TX, VA, & WA. However, the state availability footprint is slowly growing, so if it’s not offered in your state today it may well be at any time after January of 2017.
In conclusion, the FHA and Jumbo are markedly different in several ways, but the Jumbo can occasionally fill a gap that the FHA reverse mortgage cannot. The Jumbo can allow certain people that have higher valued homes and higher loan balance take advantage of the reverse mortgage program. On the downside, it does have a slightly higher interest rate and the percentage lent (percentage of the appraised value) is more conservative. The jumbo also requires two appraisals.
Shawn Lawrence Vaillancourt
NMLS License # 387151 in CA, CO, VA, MD, WA, OR
I also have a staff of reverse mortgage specialists in virtually every other state in America.
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