Reverse Mortgages: HECMS and Jumbos, Oh My!
The Home Equity Conversion Mortgage (HECM) has been around for a long time. But recent changes in the program, regulated by HUD, have enhanced the product for seniors. Today’s HECMs are FHA insured and offered through private mortgage lenders. Borrowers are responsible for paying the premiums of this insurance. You, your spouse or your heirs can never owe more than the value of your home when you leave the home (selling it, moving out, or dying). HUD also added spousal protection, so if one spouse dies the living spouse may remain in the home with no monthly mortgage payments to make as long as the spouse continues to use the home as his/her primary residence and stays current on property taxes and homeowner insurance and abides by any other loan obligations. There is a risk of foreclosure if you fail to do these things.
More recent changes to the program include the January 1st increased lending limit. For 2019, the Federal Housing Administration increased the maximum claim amount for HECMs to $726,525. For people with home values higher than this limit, new “jumbo” reverse mortgages offered through private lenders may allow borrowers to cash out more equity in their homes. With these proprietary products, the full home value is considered with a maximum lending limit of $4 million at a fixed rate.
Jumbo reverse mortgages are usually for folks looking to pull a lump sum of cash out of their property. However, some new jumbo products have emerged offering options. One allows borrowers to keep their first mortgage and leap-frog over it to take equity out and put the jumbo reverse in second place. Another “flex” jumbo allows homeowners to receive monthly checks for up to five years. And another jumbo allows for a line of credit available up to ten years. There are many options available for people with plenty of equity in their homes, so it may be best to explore them all.
With all reverse mortgages, homeowners must pay their property taxes, homeowners insurance, and HOA dues (if applicable) as well as maintain their home as part of your obligation with a reverse mortgage.
For most of my customers, choosing a reverse mortgage is usually a quality of life decision. For some, getting rid of their existing mortgage, which requires monthly mortgage payments, is a big stress relief—replacing it with a reverse mortgage with the option to make monthly mortgage payments if and when they choose (or no monthly mortgage payments) is a good alternative. For others who have their homes mostly or entirely paid off, the cash-out and line of credit options can mean buying a new car, hiring help, remodeling or upgrading their home, or simply enjoying more of the things they love by cashing out some of the equity in their home.
To learn more about reverse mortgages, register and attend the free reverse mortgage presentation with local mortgage loan originator, Marina Watts NMLS# 1458297 on Wednesday, April 10th at Aptos Library, 7695 Soquel Drive, Aptos from Noon to 1 p.m. To register, call 535-9760 or mwatts@hightechlending.com. HighTechLending, Inc. NMLS#7147, Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act.CA #4130937. Equal Housing Lender.
