Home Equity Conversion Mortgage (HECM)
Proprietary Jumbo Reverse Mortgage
Estimated Maximum Jumbo Reverse Mortgage Proceeds:
$0.00
Understanding Jumbo Reverse Mortgages
A jumbo reverse mortgage is a specialized financial product designed for homeowners, typically seniors, who own homes with a value exceeding the limits of a federally-insured Home Equity Conversion Mortgage (HECM). These loans allow homeowners to convert a portion of their home equity into tax-free cash without having to sell their home or give up ownership. Unlike traditional mortgages, reverse mortgages do not require monthly repayments; instead, the loan balance grows over time and is repaid when the last borrower permanently leaves the home (e.g., sells the home, moves out, or passes away).
Key Features and Benefits:
Access to Equity: Tap into significant home equity for retirement living expenses, healthcare costs, travel, or other needs.
No Monthly Payments: Eliminates the burden of monthly mortgage payments, providing crucial cash flow for seniors on fixed incomes.
Ownership Retention: Homeowners retain title to their property as long as they meet loan obligations.
Tax-Free Proceeds: Funds received are generally considered loan proceeds, not taxable income.
Jumbo Limits: Designed for homes valued above the HECM loan limits, which are set annually by the Federal Housing Administration (FHA).
How Jumbo Reverse Mortgages Work:
The amount of money available through a jumbo reverse mortgage depends on several factors, including:
Home Value: The appraised value of the home.
Borrower's Age: The age of the youngest borrower; older borrowers generally qualify for larger loan amounts.
Interest Rate: The expected interest rate on the loan.
Loan Type: HECM-eligible loans have specific limits, while proprietary jumbo loans may offer more flexibility for higher-value homes.
Upfront Costs: This includes lender fees, mortgage insurance premiums (for HECM), appraisal fees, and other closing costs.
Ongoing Costs: Such as servicing fees and potential ongoing mortgage insurance premiums.
For HECM loans, the maximum amount a borrower can receive is influenced by the FHA lending limit, which for 2023 was $1,089,300. However, jumbo reverse mortgages cater to homes valued significantly above this limit. The calculation for the maximum amount is complex, involving actuarial tables and specific formulas to determine the maximum amount that can be borrowed over the expected lifetime of the borrower, considering the growing equity and loan balance.
The Calculation (Simplified Approximation):
While exact calculations are complex and performed by lenders using proprietary software and specific actuarial data, a simplified approach can give an estimate. The calculation typically considers the "Principal Limit" for the borrower. This is determined by multiplying the maximum allowed loan amount (based on home value and HECM/jumbo limits) by a factor derived from the youngest borrower's age and the expected interest rate. From this Principal Limit, upfront costs (like lender fees, appraisal, title, etc.) and ongoing costs are deducted. The remaining amount is the net proceeds available to the borrower.
For HECM: The Principal Limit is generally calculated as the lesser of the home's appraised value or the HECM mortgage limit, multiplied by an age-based factor from FHA tables. This is then reduced by upfront mortgage insurance premiums and initial servicing fees.
For Proprietary Jumbo Reverse Mortgages: These are not FHA-insured and can be used for homes with values above the HECM limit. The calculation is determined by the lender and can vary, often based on similar principles but with potentially different formulas and limits. They may not require FHA mortgage insurance, but will have their own set of fees.
The Line of Credit Increase Rate reflects how the available credit line grows each year. This growth is typically based on the interest rate plus a small percentage for the annual renewal of the line of credit (known as the "growing equity" feature).
Disclaimer: This calculator provides an ESTIMATE only and should not be considered financial advice. Actual loan amounts will vary based on lender policies, specific property, borrower circumstances, and prevailing market conditions. Consult with a qualified reverse mortgage specialist for accurate figures and personalized guidance.
function calculateJumboReverseMortgage() {
var homeValue = parseFloat(document.getElementById("homeValue").value);
var borrowerAge = parseInt(document.getElementById("borrowerAge").value);
var loanType = document.getElementById("loanType").value;
var interestRate = parseFloat(document.getElementById("interestRate").value) / 100; // Convert to decimal
var serviceFeesPercent = parseFloat(document.getElementById("serviceFees").value) / 100; // Convert to decimal
var lineOfCreditIncreaseRate = parseFloat(document.getElementById("lineOfCreditIncrease").value) / 100; // Convert to decimal
var hecmLimit = 1089300; // FHA HECM Limit for 2023 (example, this changes annually)
var estimatedPrincipalLimit;
var maxLoanableValue;
// Simplified factors for illustration – actual FHA tables are much more complex
// These are very rough approximations for demonstration purposes
var ageFactorMap = {
62: 0.5, 65: 0.55, 70: 0.62, 75: 0.7, 80: 0.78, 85: 0.85
};
var ageFactor = ageFactorMap[borrowerAge] || 0.4; // Default for ages outside map
if (loanType === "HECM") {
maxLoanableValue = Math.min(homeValue, hecmLimit);
estimatedPrincipalLimit = maxLoanableValue * ageFactor;
} else { // Proprietary Jumbo
// For jumbo, we can often use the full home value or a higher limit if applicable
// This is a simplification. Actual jumbo calculations are lender-specific.
// We'll use home value directly, assuming it's high enough to warrant a jumbo loan.
maxLoanableValue = homeValue; // Assume home value is the basis for jumbo
estimatedPrincipalLimit = maxLoanableValue * ageFactor; // Using the same age factor for simplicity
}
// Deduct upfront fees (simplified – actual fees are complex)
// Service fees can include origination fees, FHA MIP, appraisal, title, etc.
var upfrontFees = estimatedPrincipalLimit * serviceFeesPercent;
var netAvailableProceeds = estimatedPrincipalLimit – upfrontFees;
// Ensure net proceeds are not negative
if (netAvailableProceeds < 0) {
netAvailableProceeds = 0;
}
// Format the result
var formattedResult = netAvailableProceeds.toLocaleString('en-US', { style: 'currency', currency: 'USD' });
document.getElementById("result-value").innerText = formattedResult;
document.getElementById("disclaimer").innerText = "This is an estimate based on simplified factors. Actual loan terms and amounts will vary. The 'line of credit increase rate' affects future potential growth of the available credit line, not the initial calculation.";
}