Many affluent seniors are looking to proprietary reverse mortgage loans as a tool to incorporate into their overall financial plan in retirement. Historically, these loan types were considered as a last resort. With borrowers having saved for retirement through investments, savings, and pensions, they are now including their high-valued home as part of the equation.
Proprietary reverse mortgage loans, commonly referred to as jumbo reverse mortgages, are designed for homeowners whose homes are in the higher value range. These homeowners must be at least 62 years and older and convert a portion of their home’s equity into cash.
Jumbo Reverse Mortgage
A jumbo reverse mortgage may be a beneficial solution for borrowers. A key item to assist with determining this is home value. The home value in question should be appraised above the traditional Home Equity Conversion Mortgage (HECM) limit of $726,625.
Jumbo reverse mortgages aren’t guaranteed by the Federal Housing Administration (“FHA”), so lenders don’t have to follow FHA guidelines. Some jumbo reverse mortgages allow homeowners to access up to $4 million (varies by lender).
Using a Home Equity as Part of Retirement Plan
Affluent seniors and financial planners are taking a closer look at the benefits of a jumbo reverse mortgage. Financial planners have been recommending to those who have investments outside their home equity to consider a jumbo reverse mortgage. Reason being, they don’t need to draw on their other assets.1 A reverse mortgage will pay off your traditional mortgage and eliminate monthly mortgage payments2 by freeing up cash for other retirement objectives.
A jumbo reverse mortgage can also help seniors curtail withdrawing from their IRA or 401(k) accounts at a loss. As an alternative, seniors may use a reverse mortgage until the portfolio recovers and minimize the likelihood of depleting the portfolio too soon.
Many seniors can benefit from a reverse mortgage and the view that reverse mortgages are only for seniors without savings is changing. Changes to the product and regulations over the past few years have made reverse mortgages more appealing to a broader audience.
To learn more about how a jumbo reverse mortgage may fit in your retirement plan, call 800.976.6211 to speak with a licensed loan advisor.
1New Retirement. Reverse Mortgage Information: Why the Wealthy Should Use Reverse Mortgages (October 28, 2014) https://www.newretirement.com/retirement/reverse-mortgage-information-why-the-wealthy-should-use-reverse-mortgages/
2Your current mortgage(s) and any other existing liens against the property must be paid off at or before closing. You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.