What is a jumbo reverse mortgage? A jumbo senior reverse mortgage is, as the name implies, a very large mortgage. To be more specific, a jumbo mortgage is a mortgage whose financed amount is greater than the maximum amount established by government-sponsored companies, or GSE. The GSE is a group of financial companies that are responsible for maintaining access to housing loans and reducing the cost of these loans so that consumers can achieve the goal of owning homes.
As part of its functions, the GSE establishes a maximum indicative amount for a mortgage. If a mortgage is greater than this amount, it is called a huge mortgage. Of course, we all know that many houses cost more, so the need for giant mortgages has increased as the price of housing has increased. Not all lenders offer huge mortgages, but there are certainly many lenders who do.
In general, a jumbo mortgage carries more risk for the lender because the payments are very high and even the wealthy buyers could have financial difficulties in the future that would prevent them from making their payments. Also, high-priced homes take longer to sell than moderately priced homes, so if an owner falls into misery, it may take some time to get out of the mortgage so that they can have the defaulted loan. Because of the increased risk, many jumbo reverse mortgage lenders will ask you for a large down payment on a jumbo reverse mortgage. The jumbo reverse mortgage interest rate might be a little higher than it would be for a mortgage that falls below the maximum amount recommended by the GSE.
Some buyers may buy a home with little or no money to use as a down payment, but this usually does not apply to someone who wants to get a jumbo senior reverse mortgage. For these huge jumbo reverse mortgage loans, most lenders insist on little money, but in most other ways, the process to get a jumbo mortgage is almost the same as getting one for a cheaper house.
If the house of your dreams is a high-priced house in a region of the country that has seen a dramatic increase in the price of housing, keep in mind that there is probably a huge mortgage available if you have a good credit history and can show your ability to repay the loan. The fact is that this jumbo reverse mortgages likely to cost you a little more than a smaller mortgage, not only regarding the amount borrowed but also regarding actual costs you for the privilege of borrowing funds.