Reverse mortgages allow homeowners aged 62 and older to access their home equity without having to make monthly loan payments These loans are available in two main forms – the federally-insured Home Equity Conversion Mortgage (HECM) and jumbo reverse mortgages offered by private lenders
While HECMs have loan limits capped based on Federal Housing Administration (FHA) guidelines, jumbo reverse mortgages cater to luxury homeowners with property values exceeding conventional conforming limits. Understanding how loan-to-value ratios work is key to determining your eligibility and potential proceeds from a jumbo reverse mortgage
What is a Jumbo Reverse Mortgage?
A jumbo reverse mortgage is a non-government insured loan designed for borrowers with homes valued higher than FHA’s lending limit, currently $970,800. Jumbos can accommodate luxury properties worth millions of dollars.
Instead of FHA insurance, these loans rely on private mortgage insurance (PMI) to protect the lender. Jumbos offer more flexibility than HECMs regarding eligible properties, lower age limits, and access to funds.
How Loan-to-Value Ratios Work
The loan-to-value (LTV) ratio determines how much you can borrow through a reverse mortgage based on your age and home’s appraised value. The older you are, the higher the LTV ratio.
For example, if you are 65 and your home is worth $1 million, an LTV ratio of 36% would give you a loan amount of $360,000. However, if you are 80 years old, your LTV may be 49%, translating to $490,000.
Jumbo LTVs tend to be lower than HECMs. According to data from top lenders, here are sample jumbo reverse mortgage LTVs for 2023:
- Age 65 – LTV up to 35%
- Age 75 – LTV up to 43%
- Age 85 – LTV up to 53%
These LTVs apply for adjustable-rate mortgages. For fixed rates, expect LTVs about 5 percentage points lower.
Factors That Determine LTVs
Lenders consider several factors when setting LTV ratios, including:
- Interest rates – As rates rise, LTVs decrease to offset risks. When rates fall, LTVs may increase.
- Home values – Luxury homes get marginally lower LTVs to account for volatility at the high end.
- Loan terms – Adjustable-rate loans permit higher LTVs than fixed rates.
- Borrower age – Older borrowers get higher LTVs based on shorter life expectancy.
- Credit profile – Lower credit scores may result in slightly lower LTVs.
- Loan size – Very high loan amounts may have lower LTVs.
- Property type – Unusual homes like lodges and houseboats may get reduced LTVs.
While lenders set their own LTV tables, they remain within acceptable risk parameters for private reverse mortgages.
Calculating Your Potential Loan Amount
Figuring out your potential proceeds involves two simple steps:
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Find your LTV ratio – Check the lender’s table to find the percentage for your age. Verify if it’s for fixed or adjustable rate.
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Multiply by home value – Take the LTV percentage and multiply it by your property’s appraised value.
For example, if you are 70 and seeking an adjustable-rate jumbo, the LTV may be 36.5%. For a home valued at $2.5 million, your loan amount is:
- 36.5% LTV
- $2,500,000 Property Value
- 36.5% of $2,500,000 = $912,500 Potential Loan Amount
This gives you an idea of the maximum borrowing power based on your age and home value. The actual approved amount also considers debts, credit, and ability to meet obligations.
Comparing HECM and Jumbo LTVs
Since HECMs limit lending to FHA’s ceiling, jumbos offer higher relative LTVs for luxury homes.
For a property valued at the 2023 FHA limit of $970,800, HECMs and jumbos have similar LTVs. But as the value increases, jumbos pull ahead.
Here’s a comparison of potential proceeds for a 75-year-old:
| Property Value | HECM LTV | Maximum HECM Loan | Jumbo LTV | Maximum Jumbo Loan |
|---|---|---|---|---|
| $970,800 | 42.1% | $409,000 | 43% | $417,000 |
| $2,000,000 | 42.1% | $409,000 | 43% | $860,000 |
| $5,000,000 | 42.1% | $409,000 | 43% | $2,150,000 |
For high-end homes, jumbos allow bigger loans by using LTVs based on the actual value rather than capping at FHA limits.
Understanding LTV Changes Over Time
It’s important to note LTVs are not fixed forever and may fluctuate over the loan term due to:
- Rate movements – If indices rise, LTVs decrease to maintain balance. When rates decline, LTVs may go up.
- New appraised values – As home values change over time, LTV adjusts based on new appraisal.
- Line of credit growth – LTV reduces as you withdraw more funds from the line of credit.
- Policy updates – Lenders may periodically revise LTV tables to manage risks.
- Loan refinancing – When refinancing, LTV is based on age and value at that point.
Lenders builds in buffers so changes in LTV still keep loans below maximum thresholds for safety and soundness.
Key Takeaways
The loan-to-value ratio determines your maximum borrowing capacity with a reverse mortgage. Jumbos use higher LTVs than HECMs to accommodate luxury homes above conventional limits. While subject to certain changes over time, LTV gives you an estimate of proceeds you can expect.
Getting personalized quotes from multiple lenders helps compare options and LTVs. Consulting a reverse mortgage counselor provides guidance to ensure you pick the right loan and use proceeds appropriately.
Jumbo reverse mortgage eligibility requirements
Because they are not backed by the federal government, each jumbo reverse mortgage lender has more freedom to decide who qualifies for one of these loans. Eligibility requirements vary, although common conditions include the borrower owning more than 50% of home equity, living in the home as a primary residence, and being at least 55 years old.
What Is a Jumbo Reverse Mortgage?
A jumbo reverse mortgage is a supersized reverse mortgage that lets older owners of high-value homes borrow up to $4 million of the equity in their property. These loans, also referred to as private or proprietary reverse mortgage loans, aren’t bound by the same regulations as government-backed home equity conversion mortgages (HECMs), resulting in higher borrowing limits (hence the name jumbo), but also potentially fewer protections.
- Jumbo reverse mortgages cater to older people who own high-priced property, are short of cash, and require access to more of their home equity than what government-insured reverse mortgages permit.
- Eligibility requirements vary, although common conditions include the borrower owning more than 50% of their home equity, living in the home as a primary residence, and being at least 55 years old.
- The amount that you can borrow generally depends on the appraised value of your home, the amount of equity that you own in the property, and your age.
- Generally, the recipient of a reverse mortgage isn’t required to return the amount borrowed plus interest for as long as they live in the home.
- Less regulation means jumbo reverse mortgage terms can differ considerably from one lender to the next.
Jumbo Reverse Mortgage Loan to Value
FAQ
What is the maximum loan to value ratio on a reverse mortgage?
How much can you borrow on a jumbo reverse mortgage?
What is the interest rate on a jumbo reverse mortgage?
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Fixed Rate
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Adjustable Rate
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Lending Limit
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8.990% (9.075% APR)
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11.825% (6.625 Margin)
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$4,000,000
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9.690% (9.775% APR)
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11.950% (6.750 Margin)
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$4,000,000
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9.990% (10.546% APR)
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12.075% (6.875 Margin)
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$4,000,000
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How do jumbo reverse mortgages work?
What is a jumbo reverse mortgage?
Borrower protections. Jumbo reverse mortgages typically carry borrower protections similar to those offered under the HECM program, such as the non-recourse feature, which means the borrower will not owe more to repay the loan than the home’s value at the time of sale. Many jumbos offer non-borrowing spouse protections, as well.
Why are Jumbo reverse mortgage rates so high?
Interest rates for jumbo reverse mortgages may be higher due to the larger loan amounts and non-FHA backing. Higher rates can impact monthly payments and the overall cost of the loan, affecting your home equity and finances.
How much can you borrow against a jumbo reverse mortgage?
With a traditional HECM reverse mortgage, the home value limit that can be borrowed against is currently capped at $1,149,825—whereas that limit on a jumbo reverse mortgage can extend into the millions of dollars. For example, let’s say Harold owns a home that is worth $1.5 million.
Do you have to pay off a jumbo reverse mortgage?
With a Jumbo Reverse Mortgage, repayment is typically not required as long as you continue living in the home. However, you have the option to repay the loan in a lump sum, providing flexibility in managing the loan balance.