You've heard what people say about reverse mortgages. The bank ends up with the house. The kids get nothing. It's a last resort.
And yet here you are, reading about a jumbo reverse mortgage. The house is paid off or close to it. It's worth more than you ever pictured. And the month is tighter than anyone in the valley would guess.
So let's start where you are. What's the house for in the next ten years? And who's it going to after that?
Hold on to those two answers. Everything below either fits them or it doesn't.
Isn't a reverse mortgage how people lose the house?
Not when it's set up right. The worry is fair, though.
A reverse mortgage lets you borrow against the house with no monthly mortgage payment while you live there. You keep the title. You still pay taxes, insurance, and upkeep. The loan gets paid back when you sell, move out for good, or pass away.
The people who lose houses on these usually stopped paying the taxes or the insurance, or moved out and didn't sell. Those risks are real. They're also things you can see coming on paper before you sign anything.
So the question isn't whether it's dangerous. It's whether it fits what the house is for.
What is a jumbo reverse mortgage?
A private reverse mortgage for a house worth more than the federal program reaches.
The standard reverse mortgage is a federal program. It has a cap on how much of your home's value it will count. In Vail, Beaver Creek, Summit County, and the Roaring Fork Valley, it comes up all the time.
Everything above that cap is equity you own and can't reach through the federal program. A jumbo, also called a proprietary reverse mortgage, is sized to the house you have.
The private programs I place start at fifty-five, where the federal one starts at sixty-two. The younger you are, the smaller the share of the house you can reach.
Is a jumbo reverse mortgage federally insured?
No.
That's the plain difference, and I'd rather you hear it here first. A jumbo is a private product. The federal insurance on the standard program isn't there, and the protections that come with the federal rules don't come along automatically. Each program sets its own.
That doesn't make it a bad product. It means you read this one more closely.
And counseling still comes first. On the programs I place, you sit with an independent counselor before the application, the same kind of session HUD requires on the federal program. The counselor isn't paid by anyone on the loan.
For a skeptic, that's the most useful hour in the whole process. What would you want to ask someone with nothing to sell you?
Does a jumbo reverse mortgage make sense for a mountain home?
If you live in it, it can.
It has to be your primary residence. That's the first thing mountain homeowners ask, because so many houses up here are second homes. The federal program never allows a second home. A few private programs look at other situations case by case, and I won't promise that on a web page. That's a conversation with the guidelines open in front of us.
The people I see with this aren't the ones the reputation describes. A retired couple who own the place outright, whose accounts took a hit the same year the tax bill went up. A widow who wants to stay in the house her kids grew up in, on a fixed income while insurance and the HOA keep climbing.
The house is holding more than the accounts ever did, and it's doing nothing.
The house is holding more than the accounts ever did, and it's doing nothing.
Does one of those sound close to where you are?
What's the catch with a jumbo reverse mortgage?
Three of them. I'd rather name them than have you find them later.
The lump sum. Most jumbo programs pay the money at the start, and interest builds on the whole amount from that day. The federal program's line of credit costs nothing to hold until you use it. If you want a reserve for later, that can favor the federal program even on an expensive house.
The pricing. There's no federal insurance premium, but a private lender prices its risk somewhere. The rate usually runs higher. Whether that works in your favor depends on how much you take and how long you stay.
The years. The costs come up front and earn their keep over a long stay. The younger you start, the longer the balance grows.
Jumbo or federal reverse mortgage: which one fits?
It depends on three things. Your age, what the house is worth against the federal cap, and whether you want money now or a reserve for later.
If the house sits under the cap, the federal program usually fits better. If you're younger than the federal program allows, a private one may be the only option. If you're old enough and the house is well above the cap, that's the real comparison, and it isn't automatic.
I'm a mortgage broker with a Colorado real estate license, and I place both. That's the only reason I can sit on your side of the table for this, and it's how selling stays on the list too. See the Vail Valley reverse mortgage page.
A couple in their late sixties owned their Vail home outright, worth far more than the federal program would count. A market drop hit their accounts the same year the tax reassessment landed. A private program with a line of credit covered their living costs while the accounts recovered, so they didn't sell at the bottom. They sat through counseling first. Taxes, insurance, and upkeep stayed theirs. Their daughter was on the strategy call.
Back to the two questions. What's the house for in the next ten years? And who's it going to?
If your kids are part of that second answer, they belong on the strategy call.
