A jumbo reverse mortgage is a private reverse mortgage for a home worth more than the federal limit. The federally insured version, the HECM, can only count a home's value up to $1,249,125 in 2026, so on a $2 million house in Newport Beach or Laguna Beach the HECM formula works as if the house were worth $1,249,125. A private loan, which the CFPB calls a proprietary reverse mortgage, is offered by a lender without FHA insurance and can count more of the home's value. That can mean more money for owners of expensive homes. It can also mean a higher rate and fewer federal rules. This page explains how the two loans differ, what California law still requires on a private loan, and how to compare the two offers side by side.
Why the HECM stops counting at $1,249,125
HUD sizes a HECM with three inputs: the age of the youngest borrower (or an eligible non-borrowing spouse), the expected interest rate, and a figure called the maximum claim amount. Under HUD's regulation, 24 CFR 206.3, the maximum claim amount is the lowest of three numbers: the appraised value, the purchase price if you are buying, or the national limit. For 2026 that limit is $1,249,125 everywhere in the country (HUD Mortgagee Letter 2025-22).
That cap is the reason this topic matters so much in Orange County. FHFA's 2026 conforming loan limit for Orange County is also $1,249,125, and many homes along the coast are worth more than that. Two neighbors whose homes are worth $1.3 million and $3 million get the same value input on a HECM. Whatever equity sits above the cap does nothing to raise the amount either of them can borrow.
The cap is a lending ceiling. It is not money anyone receives. What you can actually borrow on a HECM is a percentage of that figure that depends on your age and the rate.
What makes a reverse mortgage "proprietary"
The CFPB sorts reverse mortgages into three kinds: loans insured by the FHA (the HECM), proprietary loans that are not FHA-insured, and single-purpose loans from state and local governments and nonprofit groups. Proprietary loans come from private lenders and are usually designed for owners of higher-value homes. "Jumbo reverse mortgage" is the everyday name for the same thing.
Because no federal insurance stands behind a proprietary loan, HUD's HECM rulebook does not apply to it. The lender writes its own terms on age, property type, payout options, and rates, and those terms differ from one program to the next. Some private programs accept borrowers younger than 62, the HECM minimum, depending on the lender and the state. Some accept condos without the FHA approval a HECM requires. None of that is guaranteed, so every one of those points is a question to ask, in writing, before you apply.
Cost: no FHA insurance premium, but a possibly higher rate
A HECM carries FHA mortgage insurance, and you pay for it. Under HUD Mortgagee Letter 2017-12, the upfront premium is 2% of the maximum claim amount, and an annual premium of 0.5% of the balance is added to the loan every year after that. On a home appraised at or above the 2026 limit, the upfront premium alone is $24,982.50.
A proprietary loan has no FHA premium, since the FHA doesn't insure it. The FTC warns that private reverse mortgages "may have a higher interest rate," and the interest on a reverse mortgage compounds onto the balance every month because you make no payments. So a loan with no insurance premium can still cost more over time. The FTC also says HECMs give "bigger loan advances at a lower total cost than private loans do," and that comparison is clearest for a home valued at or under the HECM limit, where both loans count the same value. As a home's value climbs further above the limit, the private loan can count equity the HECM ignores, and the answer can change. Pricing both loans is the only way to know which side your home is on.
The protections that still apply in California
A private loan does not leave you without rules. California's reverse mortgage law starts with Civil Code § 1923, which defines a reverse mortgage as a nonrecourse loan on an owner-occupied principal residence, made by a lender licensed or chartered under California or federal law, with nothing due until the loan comes due. A loan that meets that definition is covered whether or not the FHA insures it. Under § 1923.2:
- Before taking your final application, the lender must give you a list of at least 10 HUD-approved reverse mortgage counseling agencies, and the agency you use can't be paid by the lender.
- The lender can't accept your final application or charge you any fee until seven days after your counseling session, and it needs a counseling certification signed by you and the counselor.
Federal disclosure rules reach private loans too. Regulation Z (12 CFR 1026.33) applies to any nonrecourse reverse mortgage on your principal home, insured or not, so a jumbo lender has to give you the same total annual loan cost (TALC) table a HECM lender does, at least three business days before closing. The table projects the yearly cost of the loan, fees included, at several home appreciation rates and time spans.
Nonrecourse means neither you nor your heirs owe more than the home is worth when the loan comes due. On a HECM, FHA insurance stands behind that promise. On a private loan, ask the lender to confirm in the loan documents that the loan is nonrecourse. If a lender says it isn't, it is not a reverse mortgage under California's definition, and you should walk away.
Questions to put to a jumbo reverse mortgage lender
Bring these to any private lender, and get the answers in writing:
- What value do you count, and what is the most I could borrow at my age today?
- Is the rate fixed or adjustable? If adjustable, which index, what margin, and what caps? HUD's rate caps apply only to HECMs.
- How can I take the money: lump sum, line of credit, monthly payments? If there is a line of credit, does the unused part grow over time the way a HECM line does?
- What happens if my spouse is younger than the minimum age or not on the loan, and I die or move into care first?
- Does my property type qualify, including a condo or a home with an accessory unit? Can the home stay in my living trust?
- What are the upfront fees, and what does the TALC table show at two years and at my life expectancy?
- Do you require counseling? (California law requires it either way.)
Then ask for a HECM quote on the same home. Put the two TALC tables and the two borrowing amounts next to each other.
Your obligations are the same on either loan
A jumbo loan doesn't change what keeps any reverse mortgage in good standing. The home has to stay your principal residence, and you keep paying property taxes, homeowners insurance, and any HOA dues, and keep the house in repair. California's definition is built around an owner-occupied principal residence. Under Regulation Z a reverse mortgage comes due on death, transfer of the home, or when it stops being your principal residence, and your loan documents set the exact triggers. On a high-value coastal home, property taxes and insurance can be large bills, so plan for them before you count on the loan proceeds.
If you want the money but not a loan that grows, the alternatives are worth a look too: a home equity line of credit, a cash-out refinance, or selling and buying something smaller. A HUD-approved counselor, reachable at (800) 569-4287, has to cover those options with you anyway.
Talk it over with Esther
Owner Esther Buede at Choice Home Mortgage can put a HECM quote and a private jumbo offer side by side with you, line by line, and she'll tell you plainly if neither one is the right fit. For the basics, read how to qualify for a reverse mortgage, see what a reverse mortgage costs, or check how reverse mortgage rates work. You can also start on the reverse mortgage page, try the reverse mortgage calculator, or call (949) 522-7310. You can look up any loan officer on NMLS Consumer Access: Choice Home Mortgage is NMLS #2629064, and Esther Buede is NMLS #2003644.
Choice Home Mortgage (NMLS #2629064, CA DRE #01822046) is a California-licensed mortgage broker and an Equal Housing Opportunity company. This article is for general educational purposes and is not a commitment to lend or financial advice; loan approval and terms are subject to lender requirements and your individual circumstances.
