While small in number, jumbo reverse mortgage could find a place with senior homeowners looking to cash in on home equity, writes a Wall Street Journal article published this week.
Several factors including a possible retreat of higher reverse mortgage loan limits back to $417,000 from their current level at $625,500 could lead to an uptick in the number of jumbo loans taken, the article argues, although currently they are offered by just one lender—Generation Mortgage—and they are “rare.”
“For a borrower to qualify for a jumbo, Generation does consider the borrower’s credit history but doesn’t require the full financial assessment, including debt-to-income ratio, as for a regular jumbo,” the article states, citing Generation executives.
Despite the ability a jumbo reverse mortgage can offer those with a high level of home equity, WSJ writes, there are still cautions, according to Consumers Union Senior Attorney Norma Garcia. Garcia expressed concerns over the number of borrowers who take upfront draws with their reverse mortgages and also the younger age at which they are becoming borrowers, on average.
“While she hasn’t tracked reverse jumbo mortgages, Ms. Garcia says that as many as 70% of new FHA-insured reverse-mortgage holders are taking their cash up front, with the average age of borrower at 72 years old, according to the Consumer Financial Protection Bureau, which regulates lenders,” WSJ writes.
“What this means is that people are tapping into their home equity in greater amounts at a younger age,” Garcia told the Wall Street Journal. “The concern is that as people live longer, they may be depleting their equity prematurely and not have the assets they need to pay for a nursing home or other needs to age in place at home.”
For those considering a reverse mortgage, the WSJ points to several pieces of advice including shopping around, consulting a financial planner, and calculating all costs upfront.
Written by Elizabeth Ecker