Understanding the Power of the Jumbo Reverse Mortgage in California
Proprietary Reverse Mortgages
In California, a Jumbo Reverse Mortgage is a unique choice for homeowners with high-value homes. This powerful reverse mortgage loan type goes beyond usual limits, allowing borrowers who qualify access to more money based on a portion of the home’s high value. California is a state where homes can be really pricey, this mortgage type can be a valuable option, especially for retirement planning. Getting a good grasp of how it operates in California helps you make smarter decisions about this beneficial financial opportunity. As a local California reverse mortgage company, we are here to help assist you with this innovative retirement tool which can unlock substantial home equity wealth in California's high valued real estate.
Access greater equity from your high-value California home and explore new opportunities for retirement.
What is a Jumbo Reverse Mortgage?
A Jumbo Reverse Mortgage is a home mortgage loan designed for older homeowners. Offering substantially higher loan amounts, this product can enable access to a part of the wealth held in the form of home equity in high valued property's while delaying repayment. Unlike a traditional mortgage, borrowers can choose to pay any amount towards the loan each month or opt for no monthly payments. However, they're responsible for maintaining the home, paying homeowners insurance, and property taxes, similar to a standard mortgage.
Reverse Mortgage Loan Amounts Up to $4 Million in California.
What Distinguishes Jumbo Reverse Mortgages From Standard Ones?
- Higher Loan Amounts Offered Than a HECM Reverse Mortgage (Home Equity Conversion Mortgage)
- No Mortgage Insurance Premium Costs
- Closing Cost Are Often Lower Than a HECM
- More Flexible Underwriting
- Some Condos May Qualify that Don't Meet HUD Requirements for a HECM
Benefits of a California Jumbo Reverse Mortgage
Here is a list of many popular reasons why others have secured a Jumbo Reverse Mortgage for their retirement:
• To eliminate required monthly mortgage payments on a traditional mortgage*
• To have greater financial liquidity
• To make home improvements or repairs
• To cover medical or in-home care expenses
• To buy a new home or investment property
• To establish a trust fund
• To pay off or consolidate other debts
• To provide children with an early inheritance
• To create college funds for grandchildren
• To access funds without capital gains taxes **
• To maintain their current lifestyle
* If you qualify and your loan is approved, a Reverse Mortgage must pay off your existing mortgage(s). With a Reverse Mortgage, no monthly mortgage payment is required. Borrowers are responsible for paying property taxes and homeowner’s insurance (which may be substantial). Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable when the last borrower dies, sells the home, permanently moves out, defaults on taxes and insurance payments, or does not otherwise comply with the loan terms.
** Not tax or financial planning advice. Capital gains taxes are only due upon a sale. A Reverse Mortgage is a loan, secured by a mortgage on your home, and does not require sale of the home. The proceeds of a loan are not taxable as income, consult your tax advisor and financial planner.
Jumbo Reverse Mortgage Requirements in California
Here is a quick overview of some of the qualifications for a jumbo reverse mortgage which borrower should expect:
- Age Eligibility:
- Borrower must be 55 years old or older (min age for a HECM is 62).
- Property Types:
- Property types include single family homes, PUDs, 2-4 Unit homes and some condos
- Substantial Equity In Home:
- Its necessary to have substantial equity in the property or own it outright.
- Financial Assessment:
- Underwriting will review and assess borrower's ability to cover property taxes, insurance, and upkeep expenses.
- Credit History:
- Maintain a reasonable credit history (less stringent than traditional mortgages). If borrower fails credit review there are other options including creating a set-aside account for taxes/insurance to make the reverse mortgage safer and allow a path to loan approval.
- Reverse Mortgage Counseling:
- Attend a counseling session by phone or in person with a HUD-approved counselor to understand implications and responsibilities associated with the jumbo reverse mortgage.
- Owner Occupied Residency Requirement:
- Must live in home as primary residence and continue to live in the property as your primary residence throughout the loan term.
- Legal Capacity:
- Have the legal capacity to enter into a loan agreement or utilize an approved POA - power of attorney in case of incapacitation.
This is an overview summary of many of the qualifications to secure a reverse mortgage in California and is not a complete list.
Find Out if You Qualify For a Jumbo Reverse Mortgage - Request a Proposal Quote Today
John Correll is a Certified Reverse Mortgage Professional in California and has assisted hundreds of clients obtain their reverse mortgage.
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California's Unique Case For Jumbo Reverse Mortgages
It should be no surprise that California has the largest number of reverse mortgages in the country. There are a number of unique and favorable conditions in California that make it an ideal place to get a reverse mortgage and more specifically a Jumbo Reverse Mortgage.
- High Property Values: California's expensive homes make jumbo reverse mortgages a valuable option for homeowners with significant property worth.
- Diverse Real Estate: With luxury and high-value homes, California provides an ideal setting for jumbo reverse mortgages, catering to diverse homeowner needs.
- Many Homes Exceeding Standard Lending Limits: Many homes in California surpass standard HECM reverse mortgage limits, and a jumbo reverse mortgage can offer an option for larger loan amounts.
- Support California Lifestyle: In California's costly living environment, these larger reverse mortgages empower homeowners to leverage home equity, aiding in retirement planning and ability to fund their lifestyle.
- California's Favorable Property Tax Laws Reward Longtime Homeowners: California has some favorable property tax laws which reward long time home ownership. For many older homeowners that have owned their home for many decades they have very low property taxes. A jumbo reverse mortgage can assist in staying in home and reducing the need to sell which can preserve the low property tax basis for many and allow for a low cost of living.
Pros and Cons of Jumbo Reverse Mortgages
There are a number of distinct advantages of a Jumbo Reverse Mortgage over a traditional HECM Reverse Mortgage as well as some potential drawbacks. When considering a reverse mortgage its important to take both into consideration when weighing the pro's and con's.
Pros
- Larger Borrowing Capacity: Access up to $4 million in a lump sum or line of credit, exceeding HECM limits which tend to be tailored to average property values and offer smaller loan amounts.
- No Mortgage Insurance Premium (MIP) Costs: Unlike HECMs, jumbo reverse mortgages don't require expensive mortgage insurance. This can save on the upfront closing costs where the MIP fees can be the largest closing costs as well as ongoing MIP charges.
- Access a Reverse Mortgage at a Younger Age: Available for borrowers as young as age 55 instead of the HECM minimum age of 62.
- More Property Eligibility: Condo approval by the FHA isn't necessary for qualification.
- Potentially Lower Closing Costs: The closing costs on the jumbo/proprietary reverse mortgages can often save borrowers money in upfront closing costs over a HECM mostly due to the face the Jumbo Reverse Mortgages have no MIP fees and the potential for lender credit options depending on market conditions.
Cons
- Higher Interest Rates: Typically the jumbo has a higher interest rate than a HECM does. Also the larger loan balances available will result in higher ongoing interest accrual over time.
- Limited Protections: There is no FHA mortgage insurance and jumbo reverse mortgages are not insured by FHA and as such might result in fewer borrower safeguards.
- Less Flexibility on Ways to Receive Funds: Proprietary reverse mortgages tend to have more limited payment options to borrower compared to HECMs, restricting flexibility in fund withdrawal.
- Shorter Draw Period on Jumbo Line-of-Credit: Typically the draw period for money on the jumbo reverse line-of-credit is 10 years vs lifetime draw on HECM. (while draw period may be 10 years the jumbo reverse mortgage maturity event timeframe is same as a HECM)
Frequently Asked Questions About Jumbo Reverse Mortgages in California
What is the largest reverse mortgage available in California?
- HECM: The 2024 HECM Lending Limit is $1,149,825 and qualified borrowers can access a percentage of this based on appraisal, age and interest rates.
- JUMBO/PROPRIETARY REVERSE MORTAGE: The current loan amount in California with a Jumbo Reverse Mortgage is $4 million. However there exceptions made up to $6 million loan amount
What are the interest rates on Jumbo Reverse Mortgages in California?
Jumbo Reverse Mortgages are available in both fixed and variable rate options. The fixed rate will disburse all funds at time of closing in a lump sum. The variable rate option generally is for the line-of-credit version.
Interest rates on the Jumbo/Proprietary Reverse Mortgage tend to be higher than a HECM reverse mortgage. Like traditional mortgages the market interest rates will fluctuate over time with the economy so the best way to determine what the interest rates are today is to request a quote which will detail and compare all options.
How old do you need to be to get a Jumbo Reverse Mortgage in California?
A Jumbo Reverse Mortgage in California requires the borrower is 55 years of age or older.
How does the property appraisal process work for a Jumbo Reverse Mortgage?
After counseling and application, the lender will typically order an appraisal on the home which sets the value for the property which determines how much money the borrower qualifies for.
Generally speaking, if the home is under $2 million then only one appraisal is required. For homes that exceed 2 million, underwriting will normally require a 2nd appraisal and then lend based on the lower of the two appraisals.
Is the money from a Jumbo Reverse Mortgage Taxable?
Funds paid to a borrower out of a reverse mortgage are considered by the IRS as loan proceeds and not income. This is stated on the IRS website.
*Not tax advice - consult your own tax advisor. LINK to IRS WEBSITE
In California, are there limits to how the funds from a jumbo reverse mortgage can be used?
No. There are zero restrictions on what the borrower decides to use their proceeds from their jumbo reverse mortgage for.
Are there special counseling requirements before obtaining a jumbo reverse mortgage in California?
In California, all borrowers who wish to obtain a reverse mortgage must complete a reverse mortgage counseling session with a HUD approved housing counselor. There are several types of reverse mortgage counseling and so the type of counseling will be based on the type of jumbo reverse mortgage the borrower wishes to apply for.
Special California Counseling Requirement Unique to California Reverse Mortgages
California does require a mandatory 7 day cooling off period after counseling is completed before any services such as the appraisal can be ordered. The lender or broker will assist in making sure this California requirement is met.
How long does it typically take to process and approve a jumbo reverse mortgage in California?
Generally speaking, on average it will take 30-60 days from start to completion to obtain a jumbo reverse mortgage in California. Factors that can take longer involve a 2nd appraisal or unique circumstances.
Choosing the Right Reverse Mortgage Lender or Broker in California
This article reviews some of the key factors in selecting a reverse mortgage lender or broker in California. This guide simplifies the process, explaining what to consider when choosing a company to work with on a reverse mortgage from the loan officer, lender vs broker and what to look out for and avoid. Written from the prospective of a CRMP which stands for Certified Reverse Mortgage Professional.
Inflation in California and the Role of Reverse Mortgages
This article will explore ways a Reverse Mortgage in California may help combat the rising costs associated with inflation. Presented by John Correll, CRMP certified reverse mortgage professional in California.
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California Jumbo Reverse Mortgage Company
We hope you found value in this information on Jumbo Reverse Mortgages and we invite you to give us a call. John Correll has over 25 years mortgage lending experience. He and his team have assisted hundreds of older homeowners in California in successfully researching and obtaining a reverse mortgage for themselves.
We would love the opportunity to earn your business.
(888) 603-1550
Get started today by requesting your online quote or give us a call.
