A reverse mortgage, or home-equity conversion mortgage (HECM), is a mortgage that allows the borrower to benefit from 50% or more of the equity of their home up to $625,000. It is possible to borrow more than $625,000 by accessing a jumbo reverse mortgage, borrowing up to 25% of the home’s equity. Interest rates for a jumbo reverse mortgage on average list 1-2% higher than a standard HECM.
A jumbo reverse mortgage is available to borrowers 62 years of age or older, the home must be the primary residence of the borrower, credit history is viewed but a jumbo reverse mortgage does not require full financial disclosure such as debt-to-income ratio.
Borrowers benefiting from a reverse or jumbo reverse mortgage have the option of receiving the borrowed amount in a large lump sum or regular payments in which zero principal or interest is paid until the home is sold or the homeowner passes away.
MarketWatch has reported that retirees who choose a reverse mortgage as an option use the funds received for anything from covering high property taxes to making “improvements that would allow them to stay in their homes”, to covering home health-care costs.