Reverse mortgage loan limits have reached an all-time high. Every year, HUD reviews house price data from FHFA to determine the baseline conforming loan limit to reflect the changes to the national average home price. From three, they extrapolate the loan limits. HUD generally follows suit and this year was not an exception. The result is a record limit for federally-backed reverse mortgage loans of $1,089,300.
2022 vs 2023 Reverse Mortgage Limit Comparison
|Age||New 2023 Limits |
|2022 Limits |
What Does the Lending Limit Really Mean?
The lending limit is the maximum value that we will give to your home, even if it appraises higher than the limit. For example, a home valued at $1,250,000 would have a lending limit of $1,089,300 in 2023. We use the lending limit to determine how much proceeds are available to borrowers.
The complete formula for determining HECM loan proceeds is we use the lesser of the home value or lending limit and multiply that by a factor previously determined by HUD, which is based on your age and the current interest rate. In general, the older you are, the more proceeds you qualify for. Additionally, the lower the interest rates, the more proceeds that can be accessed.
History of Reverse Mortgage Limits
In 2006, HUD established a national loan limit of $417,000. Prior to 2006, the limits would change from county to county with some counties having higher limits than others.
|YEAR||NATIONAL HECM LENDING LIMIT||LIMIT INCREASE ($)||LIMIT INCREASE (%)|
|2009 - 2016||$625,500||$208,500||50%|
|2006 - 2008||$417,000||* National Lending Limit of $417,000 was Implemented in 2006, which replaced regional loan limits.|
Additional Reading: History of the reverse mortgage program from 1961 through present
2023 HECM vs. Jumbo (Proprietary)
When determining which reverse mortgage program is the best fit for a borrower, it’s important to compare all programs. Jumbo reverse mortgages, also called proprietary reverse mortgages, generally work best for higher home values. Since the lending limit increased to over $1 million, based on the current market, we don’t see a large benefit of using a jumbo reverse unless the home value is over $1,250,000. There are multiple reasons to consider a jumbo, so it’s not 100% cut and dry, but in general, consider looking at a jumbo with homes valued above $1,250,000. The chart below offers a comparison on the HECM lending limits and the jumbo loan limits. Note that the HECM limit stays the same for all home values above $1,089,300.
|HOME VALUE||2023 HECM||2023 JUMBO||NET BENEFIT ($)|
(Table based on borrower age 75. HECM Rate used in illustration: 2.50% CMT Margin. Expected rate at time of calculation on 12/6/2022: 6.13%. Jumbo reverse chosen for comparison is HomeSafe. Note that proceeds change week to week to it’s best to obtain a written estimate from one of our licensed reverse mortgage advisors.)
2022 has been quite a year in real estate and mortgages. Rates spiked causing reverse mortgage loan proceeds to be reduced from prior amounts. The real estate market has started to soften. The bright note for those with homes over a million dollars is that the new reverse lending limits will help provide additional proceeds.
Going into 2023 there a lot to be grateful for. Reverse mortgages have helped over a million homeowners age in place. It’s viable solution for so many and worth exploring with a true reverse mortgage professional.
2023 HECM limit details were published in Mortgagee Letter 2022-21 and will be included in a future Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1) release.