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A comparision of jumbo and HECM reverse mortgages

A new option for owners of high-value homes!

Today the two most popular types of equity access mortgages on the market are the Home Equity Conversion Mortgages (Insured by the FHA), and Jumbo proprietary Portfolio mortgages. While FHA HECMs have been around for 30 years, jumbo portfolio mortgages are a newer option for owners of a higher-value property, gaining prominence over the last decade with flexible program choices.

The jumbo portfolio is good news for today’s homeowners that have seen significant growth in value in recent years; homeowners of properties with values over $1,000,000 or higher often find this is the best way to incorporate their home equity into their retirement plan. Many Financial Planners recommend the jumbo portfolio as a tool that allows their senior clients to tap into considerably more of their home’s value

This is designed for homeowners of higher-valued properties that exceed the maximum value that FHA will consider when calculating a loan amount ($970,800), helping them access a larger portion of their home’s value. Those over the age of 55-60 with significant equity in a more expensive home are ideal candidates.

What benefits make a jumbo portfolio mortgage different?

While they have many similarities to the FHA reverse, they are unique for a number of reasons. One of the most notable benefits is that many of these offer loan amounts as high as $4 million. In addition, property values are considered up to $10 million when calculating loan amounts.  Another advantage is that these private mortgages do not charge the significant FHA insurance premiums that are required on FHA’s Home Equity Conversion Mortgage. Traditionally one of the FHA reverse mortgage’s most significant closing costs and ongoing monthly charges.

A jumbo portfolio mortgage is a private or proprietary loan which means the loans terms, conditions and guarantees are established by the lender versus the typical FHA insured HECM which is administered by HUD. In addition to not incurring the cost of mortgage insurance, today’s jumbo reverse mortgage is available with very low closing costs, even significantly lower than closing costs for the refinance of a traditional home loan. Some jumbo portfolio programs have closing costs as low as $125.

Here are some of the features (features and benefits vary by the issuing bank and jumbo loan that is chosen).

  • Loan amounts up to $4,000,000
  • Property Values up to $10,000,000
  • No first-year limits on how much cash you can draw
  • Flexible options for accessing your home equity:
    * Lump Sum of Cash to You at Closing
    * Monthly Payments to You for 12 to 60 months
    * Jumbo portfolio as a 2nd mortgage behind your current low rate 1st mortgage
    * Line of Credit
    * Combination of some of the Options above

Here are just a few of the unique ways other homeowners have used theirs:

-"Our Jumbo portfolio mortgage improved our cash flow by eliminating a required mortgage payment and improved our feeling of security with a sizable standby line of credit"

-"My grandchildren will be graduating from college with no student loans thanks to our Jumbo Portfolio Mortgage"

-"With our Jumbo Portfolio mortgage, we put a new roof on our home and updated the kitchen and bathrooms making our home more secure, comfortable...and valuable...while eliminating our required mortgage payment and all without taking on any new monthly payment”.