Everything You Need to Know About Jumbo Reverse Mortgage Rates

Reverse mortgages come in three shapes and sizes: a traditional reverse mortgage, a reverse mortgage refinance, and a reverse mortgage for purchase. But there's a fourth option that you may have yet to hear of - jumbo reverse mortgages.

They're essentially a supersized version of typical reverse mortgages. Most importantly, its pros outweigh the cons: lower age limits, higher loan limits, no mortgage insurance, etc. 

Does this sound like the right kind of mortgage for your next property? Read on to learn more about its current rates.

What is a Jumbo Reverse Mortgage?

A jumbo reverse mortgage is a bigger, better version of a reverse mortgage. It allows senior homeowners to borrow up to $4 million in equity. 

Better known or proprietary reverse mortgages, these loans don't have the strict rules of a HECM. That leaves room for higher borrowing limits, hence the name "Jumbo."

Jumbo Reverse Mortgage Rates

Here are the current jumbo reverse mortgage limits and rates.

With a fixed-rate jumbo reverse mortgage, your only payment option is a lump sum. Meanwhile, an adjustable-rate mortgage allows for a lump sum or line of credit. This type of mortgage also has a lifetime cap of 5% more than the starting interest rate.

We've estimated the APR based on an assumed $1,000,000 loan amount, including standard third-party closing costs.

How to Find the Best Jumbo Reverse Mortgage Rates

Although jumbo reverse mortgage rates are much more affordable than traditional options, it doesn't mean you must stick with your first option. Here's how to do better research and find the best rates for your circumstances.

1. Compare Offers From Multiple Lenders

Gather a list of potential lenders and compare their interest rates – your first option will most likely not be the most affordable one. Mortgage rates can vary significantly among different lenders.

2. Review Fees and Closing Costs

Beyond the interest rates, you'll also need to review the closing costs and other associated fees. This may include appraisal fees, origination fees, and serving fees. Do your research to ensure your lender is reasonable with the overall closing number.

3. Evaluate Loan Terms

Finally, take a closer look at the loan terms of each lender. Remember to review the interest rate type and repayment option to make sure the loan terms suit your financial goals and limits.

How to Calculate Jumbo Reverse Mortgage Rates

Calculating jumbo reverse mortgage rates is pretty complicated, but you can do so with the following steps. 

1. First, understand the two components of jumbo reverse mortgage rates: index rate and margin. The index rate is a benchmark interest rate, while the margin is a fixed number added to the index by the lender to determine the interest rate.
2. Find out which index rate the lender uses for jumbo reverse mortgages. The lender is required to give you this information. Check financial websites or news sources for the current value of the chosen index rate.
3. Ask the lender for the margin they offer on their jumbo reverse mortgages. The margin remains constant throughout the loan's life. 
4. Add the index and margin to determine the total interest rate. This formula can be written as Total Interest Rate = Index Rate + Margin.
5. Keep in mind that jumbo reverse mortgage rates may also be influenced by the loan-to-value ratio and loan terms. Lenders may offer varying interest rates and loan terms based on your budget.

We recommend using a jumbo reverse mortgage rate calculator for more accurate results.

How to Manage Jumbo Reverse Mortgage Rates

Once you've picked a lender, you can still make efforts to keep your jumbo reverse mortgage rates in check. Here's what we recommend. 

1. Fixed Rate Options

First, determine whether a fixed or adjustable rate jumbo reverse mortgage better suits your financial needs. In most cases, fixed-rate loans are much better since they're stable and predictable throughout the loan's life.

Adjustable-rate options may be more affordable initially, but they can add up over time. Luckily, there are limits to how much the rate can change – no more than 5% over the original rate for jumbo reverse mortgages.

2. Refinancing

If the current market conditions are too dynamic or you've found a better rate option, consider refinancing your jumbo reverse mortgage. Refinancing lets you replace your current mortgage loan with a new one with more favorable terms like lower interest rates or reduced fees.

3. Hire a Financial Advisor

Consult a professional financial advisor if your jumbo reverse mortgage rates affect your financial health. They'll show you the right course of action based on your current goals, budget, and loan terms. 

Eligibility Criteria for Jumbo Reverse Mortgage 

Here are the main jumbo reverse mortgage requirements you need to fulfill to qualify. 

1. Age

Depending on the lender and your state, you must be at least 55 to 62 years old.  

2. Property Type

The property can be a townhouse, single-family home, condo, or multi-family residence with up to four units. The borrower needs to be living in one of these units. This property also needs to be their primary residence, where they live most of the year.

More importantly, the property must be in a good, livable condition. 

3. Taxes, Insurance, and Other Fees

You must be up to date on all your expenses and payments, including:

• The property taxes
• Home insurance premiums
• Homeowners' association fees

You should also be able to continue paying these fees once you've taken the loan. 

Benefits of a Jumbo Reverse Mortgage

Jumbo reverse mortgages cater to a relatively niche group: senior homeowners short on cash and no other way to secure it. Here are some benefits you can expect from a jumbo reverse mortgage.

1. No Mortgage Insurance

All HECM borrowers must have mortgage insurance, which is far from affordable. But it does cover the risk if the loan can't be repaid in full. Jumbo reverse mortgages don't have this requirement. 

2. Higher Loan Limits

Jumbo reverse mortgage loan limits are generous. In fact, you can borrow up to $4 million via line of credit or in a lump sum. This is four times higher than the annual limit for HECMs.

3. Lower Age Limit

Borrowers must be at least 62 to apply for an HECM. Jumbo reverse mortgage caps the minimum age limit at 55. 

4. More Homes Qualify

Unlike an HECM loan, you don't need to get your home approved by the FHA to qualify for this mortgage type.  

Drawbacks of a Jumbo Reverse Mortgage

Just like any limits, jumbo reverse mortgages have their downsides, too. Here's what you need to know before you invest.

1. High Closing Costs

Jumbo reverse mortgages often have higher interest rates than HECMs since you'll be borrowing a much bigger amount. Plus, the loan is borrowed over a much longer time frame. The lender uses the interest rates as a safety net in case the property value plummets.

2. Prone to Scams

Since jumbo reverse mortgages aren't regulated, they're also vulnerable to scams. Don't accept every pitch you get, and if you've been scammed by a lender, make sure to contact the CFPB right away.

3. Fewer Protections

Jumbo reverse mortgages are a lot more flexible without government backing, but that also means they're not protected. The lenders aren't bound by FHA rules, so read the fine print of all their loan terms before you sign anything.   

4. Fewer Payment Options

Jumbo reverse mortgages aren't as flexible when it comes to payment options. You'll need to accept the money in a lump sum or through a line of credit. You don't have the option to receive a monthly income like with an HECM. 

Jumbo Reverse Mortgage vs. Traditional Reverse Mortgage

A traditional reverse mortgage, or HECM, is available to senior homeowners who are over 62 years old. They must also have a good amount of equity in their home. These mortgages are insured by the FHA and regulated by HUD.

The FHA sets a new loan limit on traditional reverse mortgages every year – $1,149,825 as of 2024.

But with a jumbo reverse mortgage, there's no such thing. Borrowers can get these loans even at 55 years old, and these mortgages aren't backed by a government agency. The current maximum limit is $4 million.

Key Takeaways

1. Types of Reverse Mortgages

• Traditional Reverse Mortgages: Also known as Home Equity Conversion Mortgages (HECMs), these are available to seniors 62 years and older with significant home equity.
• Reverse Mortgage Refinance: Allows refinancing an existing reverse mortgage to improve loan terms.
• Reverse Mortgage for Purchase: Enables seniors to buy a new primary residence using a reverse mortgage.
• Jumbo Reverse Mortgages: A higher-value option that allows borrowing up to $4 million, designed for those with more expensive homes.

2. What is a Jumbo Reverse Mortgage?

• Higher Loan Limits: Borrow up to $4 million, significantly more than traditional reverse mortgages.
• Fewer Restrictions: Not bound by the strict regulations of HECMs, offering more flexibility.

3. Current Jumbo Reverse Mortgage Rates

• Fixed Rates: Range from 9.375% to 9.990% APR.
• Adjustable Rates: Range from 11.645% to 11.895% APR.
• Loan Limit: The maximum lending limit is $4 million.

4. Eligibility Criteria

• Age: Must be between 55 to 62 years old, depending on the lender and state.
• Property Type: Eligible properties include townhouses, single-family homes, condos, and multi-family residences (up to four units). The property must be the borrower's primary residence and in good condition.
• Financial Obligations: Borrowers must be current on property taxes, home insurance premiums, and homeowners' association fees.

5. Benefits of Jumbo Reverse Mortgages

• No Mortgage Insurance: Unlike HECMs, jumbo reverse mortgages do not require mortgage insurance, reducing overall costs.
• Higher Loan Limits: Up to $4 million can be borrowed, far exceeding the HECM limit of $1,149,825 as of 2024.
• Lower Age Limits: Borrowers can qualify as early as age 55.
• Flexible Property Eligibility: No need for FHA approval, making more homes eligible.

6. Drawbacks of Jumbo Reverse Mortgages

• High Closing Costs: Interest rates and closing costs are generally higher than traditional reverse mortgages.
• Risk of Scams: Lack of regulation makes jumbo reverse mortgages more susceptible to fraudulent schemes.
• Fewer Protections: Without FHA backing, borrowers have fewer safeguards.
• Limited Payment Options: Funds are disbursed as a lump sum or line of credit, with no option for monthly payments like HECMs.

7. Jumbo Reverse Mortgage vs. Traditional Reverse Mortgage

• Age Requirement: Jumbo mortgages start at age 55, compared to 62 for traditional reverse mortgages.
• Loan Limit: Jumbo allows up to $4 million, while traditional mortgages are capped at $1,149,825.
• Regulation: Traditional reverse mortgages are FHA-insured and government-regulated, providing more borrower protections.

Conclusion

A jumbo reverse mortgage is an excellent option for senior homeowners who feel restricted by a traditional reverse mortgage. You can borrow up to $4 million, tapping into your home equity and even using the funds as a monthly pension check. 

Plus, this loan type has endless pros: no mortgage insurance, lower age limits, and the ability to receive all your funds in the first year. What more could one want?

But before you invest, remember to get in touch with a processing or loan officer team.