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Reverse Mortgage Lending Limit Increases for 2022

Limits for reverse mortgage lending are increasing in 2022 to allow retirees that have substantial home equity to get more money than was available to them in previous years.

With a reverse mortgage, a homeowner is able to access home equity in the form of a loan as long as you are age 62 or older. This is different from a traditional mortgage in that it does not require monthly payments toward the loan balance.

As you use your home equity the loan balance grows, but borrowers are not required to repay the loan balance until they sell the home or move out of it.

The Federal Housing Administration, or FHA, sets lending limits on loans that they back including the home equity conversion mortgage or HECM. This is the most common and popular type of reverse mortgage used by retirees right now.

Reverse mortgage limits are based on the median home prices for a particular area and are usually settled between an area’s low and high-cost limits. At the end of 2021, the FHA reported it will increase HECM reverse mortgage limits to a high of $970,800. This is potentially great news for many seeking a reverse mortgage.

How lending limits can impact reverse mortgage payout

The net principal amount is one of the factors used to determine how much you will be able to receive from a reverse mortgage loan after closing fees and other costs have been paid.

This loan amount is determined by the value of your home upon official appraisal or the net principal limit of $970,800. Whatever number is less is the amount you can qualify for. If you have a home that is valued at greater than this limit number looking into a jumbo proprietary loan might be a great option.

Other things considered when determining your reverse mortgage qualifications include interest rates, your age, and any other owner’s age in the home. For a retiree with a home valued within FHA lending limits the decision to increase the loan limits allows homeowners to qualify for more money from HECM reverse mortgage products than ever before.

Reverse mortgage limits have not been raised for some time. During 2009 when the country saw a big recession the federal government passed the American Recovery and Reinvestment Act of 2009. This legislation is sometimes also referred to as the Stimulus Bill or the Recovery Act and it raised the loan limit for each HECM reverse mortgage from $417,000 to $625,500.

The increase was intended only to last through 2009, but Congress has continuously extended it since then until this year when they raised levels to over $900,000. Over the last few years, Congress has passed several legislations designed to improve benefits and safeguards of using a reverse mortgage to help with the expenses of retirement.

With the right knowledge and a trustworthy real estate expert in the reverse mortgage arena, you could benefit from using a reverse mortgage in your retirement. It is always best when considering a reverse mortgage to do plenty of homework and to make sure you have the trustworthy advice of a professional that is reputable on your side.

For more information on purchasing or selling a home in San Tan Valley and surrounding areas, please contact us anytime.

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