reverse loans santa barbara
California obviously has the most expensive properties in the country and a very high rate of citizens who are seniors but are carrying mortgages on their homes which are preventing them from retiring due to mortgage debt.
Many working seniors would like to retire but they can’t because of the ongoing mortgage payments and sometimes they find themselves withdrawing funds from their retirement investments to make the payment each month.
And depending on how many years are left on the mortgage, many are concerned about running out of money to make the payments and the other monthly obligations.
The average home value in California generally exceeds the HUD Lending Limit that is currently at $679,650 and if a homeowner has a home with a great deal more equity than the FHA HECM would allow them to withdraw, then a Jumbo reverse loan would be an additional option for consideration.
There are many new Jumbo loan programs to choose from that are superior to the FHA HECM in many aspects and are considerably less expensive in regards to fees. Here are some highlights and are subject to change in the future.
- Maximum loan amounts to 4 MM
- Fixed rates or a LOC
- 2nd T.D’s for those who would like access to their equity but currently have a 1st T.D. in place with a favorable interest rate they wish to keep, preserving more of their equity. This option can also be used as a 1st T.D.
- Origination fees vary by the loan choice but are “none” to either 6K or 8K maximum.
- No Mortgage Insurance Premiums.
- Non-Recourse Loan. The borrower continues to own their home. No equity sharing or pre-payment penalties. The property will go to the heirs of the borrowers when they (the borrowers) have passed away.
- Can be used to purchase a home. “Right-Sizing/Down Sizing”.
- No payments are required other than the borrower must continue to pay property taxes, Homeowners Insurance, and HOA fees and keep the property well maintained.
- No loan terms.
- Borrowers must be at least age 60 or 62. It depends upon the loan choice to determine the minimum age.
Most of the reverse loans that are originated are the FHA HECM program and over the years has been the “workhorse” for allowing seniors to utilize their home’s equity without having to qualify for a mortgage payment.
And as of this post, that continues to be the most commonly used reverse mortgage, however, in the last few years, another option has become available to seniors, especially those who have expensive properties at one million dollars or more.
The FHA HECM loan has a cap on the value of the subject property ( As of 2018) of $679,650 and the new loan will use that as the maximum appraised value, a percentage of “that” and the youngest borrower’s age to determine the amount of money the senior will receive at the close of escrow.
But what if you want more money than it will provide or you have a large mortgage you want to be paid off, but the funds in the HECM are insufficient to achieve this goal?
A Jumbo proprietary reverse mortgage might be the solution because the loan will consider properties valued as much as 6MM and as low as $700,000 and the interest rates are “fixed”. An additional benefit would be if someone lives in a Condo that is not on the approved FHA Condo list (That means they cannot do a HECM), a proprietary Jumbo reverse loan is the answer to this common problem.
An additional benefit to using this loan is that the Closing Costs are less than the FHA HECM because the borrower is not being charged the MIP insurance premium that all FHA loans require. And some are not charging an Origination fee, making the loan much more inexpensive to the borrower in comparison to the HECM.
As more lenders are offering Jumbo reverse loans and the industry evolves to meet the demand for them, I am sure that there will be new programs and opportunities for seniors to access the equity in their homes into the future making their retirement years more affordable and comfortable.