Quick Answer
For California homes above the $1,249,125 HECM lending limit, a standard HECM caps the MIP at $24,983 and the principal limit regardless of the home's higher value — making a proprietary jumbo reverse mortgage the better option, which trades the MIP (saving $24,983) for an uncapped origination fee that requires comparison shopping.
- HECM: MIP capped at $24,983, principal limit capped at lending limit regardless of higher value.
- Proprietary jumbo: no MIP ($24,983 savings), but no origination fee cap.
- Proprietary origination fee: competitive lenders charge $6,000 to $15,000; non-competitive up to $40,000+.
- The proprietary option accesses the full home value — no lending limit cap.
- Proprietary principal limits at 2026 values can be $200,000 to $400,000 higher than HECM.
- Always get the proprietary proposal in writing and compare with at least one competing quote.
Key Facts
| Topic | Key Fact |
|---|---|
| HECM MIP maximum | $24,983 (2.0% × $1,249,125) |
| HECM principal limit cap | Calculated on $1,249,125 regardless of higher value |
| Proprietary MIP | None — significant savings vs HECM |
| Proprietary origination fee | No federal cap — ranges from $6,000 to $40,000+ |
| Proprietary principal limit | Based on full home value — no lending limit |
| Value at $1.5M (67yo) | HECM: ~$624K PLF; Proprietary: potentially $700K-$900K |
| Comparison required | Get written Loan Estimate from 2+ proprietary lenders |
| Jay's practice | Models HECM vs proprietary for every CA high-value consultation |
Detailed Explanation
For California homes above the $1,249,125 HECM lending limit in 2026, the choice between HECM and proprietary financing involves a specific cost trade-off: the HECM provides consumer protections (origination fee cap, FHA counseling requirement, FHA insurance fund backing) but caps the principal limit at the lending limit regardless of higher value. The proprietary program accesses the full home value and eliminates the $24,983 MIP — but has no origination fee cap.
The MIP savings from a proprietary program are substantial and immediate. On a $1.5 million California home, the HECM would charge $24,983 in upfront MIP (on the $1,249,125 limit). A proprietary program charges no MIP — saving $24,983 at closing. This savings is real and meaningful. The question is whether the proprietary origination fee consumes or exceeds this savings.
A competitive California proprietary lender for a $1.5 million home typically charges $8,000 to $12,000 in origination fees — meaning the total cost is still lower than the HECM (no $24,983 MIP, $8,000 to $12,000 origination fee versus HECM's $24,983 MIP + $6,000 origination = $30,983). The proprietary option is also better on proceeds — accessing the full $1.5 million value rather than the capped $1,249,125. The competitive proprietary program wins on both cost and proceeds for California high-value homes.
The non-competitive proprietary program — the $40,000 origination fee scenario — eliminates the cost advantage entirely. A $40,000 origination fee on a proprietary program, compared to the HECM's $30,983 total (MIP + origination), makes the HECM the better cost choice — despite the lower proceeds. This is the case for comparison shopping: without a written Loan Estimate from a competitive proprietary lender, the borrower cannot know which structure is truly better.
Jay Zayer, CRMP — 18 Years Experience
The high-value California consultation involves a specific modeling exercise I conduct in every first call: HECM at $1,249,125 cap versus proprietary at full value. I run the principal limits, the costs, and the net proceeds side by side. For a $1.8 million La Jolla home at age 71, the difference in principal limit between HECM and proprietary might be $150,000 to $200,000 — meaning the proprietary option provides significantly more access despite potentially lower consumer protections. The client makes the decision with both options modeled clearly.
Who This Is Right For
This may be a good fit if:
- California homeowners with homes above $1.25 million who want to understand the HECM-versus-proprietary cost comparison
This may NOT be the right fit if:
- There is no situation where understanding high-value home costs would be inappropriate
Common Misconception
Myth: The HECM is always the best reverse mortgage option for California homes.
Fact: For California homes above the $1,249,125 HECM lending limit, a competitive proprietary program typically provides both lower costs (no MIP) and higher proceeds (no lending limit cap). The HECM's consumer protections are valuable but must be weighed against the proceeds and cost difference.
Source: HUD HECM lending limit; Finance of America HomeSafe program
Authoritative Sources
- HUD: HECM lending limit — hud.gov
- Finance of America: HomeSafe programs — financeofamerica.com
- NRMLA: Jumbo reverse mortgage guide — nrmlaonline.org
People Also Ask
What is the principal limit on a $1.5 million California home?
HECM: approximately $620,000 to $660,000 (using the $1,249,125 cap, not the full $1.5M). Proprietary: potentially $750,000 to $900,000 depending on age, rates, and program.
Which is better — HECM or proprietary — for a $1.5 million California home?
In most cases, a competitive proprietary program produces more proceeds at lower cost (no $24,983 MIP). The HECM provides stronger federal consumer protections. Jay models both for every high-value California consultation.
How do I compare proprietary reverse mortgage offers?
Request a written Loan Estimate or comparable cost disclosure from at least two proprietary lenders. Compare the origination fee, interest rate, principal limit, and total cost. Never commit to a proprietary program without comparing at least two proposals.