After the end of your working life, you have finally waited (or expect) the retirement. While working, you save for the golden age and plan to enjoy it to the maximum. But when you finally retire, there is a chance that distributions from pension savings (or a lump sum that you withdraw) are not enough to achieve everything you want.
That calls for some alternative methods to boost your retirement funds. You can read more about them on this source. One of the ways is to use your home equity and apply for a jumbo reverse mortgage. This loan is usually favorable for seniors with high-value properties (more than $900,000 in equity). Also, private companies back it, so it allows more flexibility.
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Increased Borrowing Limit
Unlike FHA-backed reverse mortgages, jumbo reverse ones allow you to ‘pledge’ the equity of your high-value property. You can get up to 6 million dollars of your home equity and use that money to increase your retirement fund. But that amount will depend on many factors, such as the borrower’s age, property value, current indebtedness, etc.
HECM allows you to refinance only a portion of your home’s balance. On the other hand, a jumbo reverse mortgage lets you borrow the entire amount of your equity. That’s especially beneficial in areas with high living costs.
Spend Money the Way You Want
This loan is designed to help seniors get extra cash for medical expenses, unexpected costs, or leisure. So if you’re a homeowner, you can borrow some money against your substantial home equity. Then, if you get a mortgage approval, you can spend it as you wish.
A reverse mortgage is an excellent way for you to refinance large mortgage balances, pay off high-interest debts like credit cards, and boost your retirement savings. This loan will simplify all payments and your financial situation.
It can also help you distribute your money to your heirs without leaving them a huge debt. But before applying for a jumbo reverse mortgage make sure to know what this loan entails and the benefits it can provide.
Maintain Property Ownership
Jumbo reverse mortgages for seniors can be a great option for many retirees on fixed incomes. This loan can allow you to age in your place while cutting your monthly payments. In fact, you are not obliged to pay installments every month. But you still pay taxes, maintenance costs, and insurance premiums.
This loan doesn’t accumulate interest until the borrower takes it. So you can maintain your home as long as you meet certain requirements. You can use this money to pay off an existing debt, which can be especially beneficial when you don’t want to take money out of your 401(k) or IRA.
More Home Equity
While jumbo reverse mortgages for seniors are less popular than conventional ones, they can give you access to more home equity than government-insured loans. For example, HECM loans limit you to a certain amount. Jumbo reverse loans allow you to access more equity and borrow more money.
Still, this type of mortgage is a wild west with little government regulation. It lacks legal protections since private companies make these loans. So, there’s some self-will in determining the lending terms. So, it’s important to carefully review the loan deal before committing to it.
No Insurance Premiums
While the FHA mortgage insurance provides some protections, the upfront premiums costs can be high. Jumbo reverse loans offer the same non-recourse protection but with the added advantage of not requiring mortgage insurance.
The cost of closing a jumbo reverse mortgage is lower than that of an FHA loan. For example, the lender may charge you an underwriting fee of 1% to 2% of the appraised value of your home. On the other hand, the jumbo reverse loan insurance premium is based on the value of your home, not on your loan balance.
Protection and Security
Jumbo reverse mortgages can benefit seniors for several reasons, including the ability to pad retirement accounts, plan for assisted living, and improve home safety. Still, this loan is not for everyone, and the guidelines can be confusing. Although it’s quite easy to qualify, you should think twice before applying.
This loan offers several built-in protections, such as not worrying about paying back-end fees or prepayment penalties. Also, the funds can even be left to a non-borrowing spouse who can continue living in the home and pay taxes and insurance, as necessary. You’re fully protected as long as your loan balance doesn’t exceed your home’s value.
Depending on your circumstances, a jumbo reverse mortgage can provide you with enough funds to live comfortably in your golden age. You receive a lump sum payment but must keep up with the cost of application, procedure, property taxes, and insurance premiums.