2024 HECM Cap Raised:
The Federal Housing Administration has recently declared an increase in the highest lending limit for Home Equity Conversion Mortgages for the 2024 calendar year. The new limit is set at $1,149,825, up from the previous $1,089,300. This change will be effective for case numbers assigned from January 1, 2024, onwards.
Further information can be found in Mortgagee Letter 2023-22, and these changes will be incorporated into an upcoming update of the Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1).
2023 vs 2024 Reverse Mortgage Limit Comparison
| Age | New 2024 Limits ($1,149,825) | 2023 Limits ($1,089,300) | Increase ($) |
|---|---|---|---|
| 62 | $389,790 | $369,272 | $20,518 |
| 65 | $415,086 | $393,237 | $21,999 |
| 70 | $456,480 | $432452 | $24,028 |
| 75 | $489,825 | $464,041 | $25,784 |
| 80 | $542,717 | $514,149 | $27,942 |
| 85 | $615,156 | $582,775 | $32,381 |
| (Table is based on home values of $1,149,825 or higher and assumes a 6.32% Expected Rate) | |||
Understanding the Implications of the Lending Limit
The lending limit represents the maximum valuation we assign to your property for loan purposes, regardless of whether its actual appraisal value is higher. Take, for instance, a home with an appraisal value of $1,250,000 in 2024; for lending purposes, its value would be capped at $1,149,825. This cap is crucial in calculating the amount of funds available to borrowers.
To determine the proceeds of a HECM loan, we apply a specific formula. We start by taking the lower of the home’s value or the lending limit. This figure is then multiplied by a percentage that HUD has established, which varies depending on your age and the prevailing interest rates. Generally, the formula is designed so that the older you are, the higher the potential loan proceeds you can qualify for. Similarly, more funds are typically accessible when interest rates are lower.
Evolution of HECM Lending Caps:
The trajectory of HUD lending limits has historically mirrored the fluctuations in home values. The landscape of these limits underwent a pivotal shift in 2008, transitioning from region-specific caps to a unified national ceiling of $417,000. This change marked a departure from the previous approach that was based on regional housing values. The following year, in 2009, under the impetus of the Housing and Economic Recovery Act, the limit experienced a substantial hike, setting the new bar at $625,500.
This figure remained constant for eight years until 2017, when it witnessed a modest increase of $10,650, bringing it to $636,150. Although not a dramatic rise, it was reflective of the gradual upswing in housing prices. The momentum of increases maintained its pace thereafter. In 2018, the HUD HECM cap ascended to $679,650, marking an upsurge of $43,500. The year 2019 saw the limit climb further to $726,525, an increment of $46,875, opening new refinancing possibilities for reverse mortgage borrowers. The upward trend continued into 2020, with the cap reaching $756,600, a rise of $39,075.
The Covid pandemic era did not halt this upward trajectory. In 2021, the HECM cap expanded to $822,375, an increase of $56,775, despite the global economic uncertainties. Remarkably, 2022 defied expectations with a significant spike in housing prices, propelling the HUD limit to an impressive $970,800, a leap of $148,425 in a single year!
This pattern of growth persisted into 2023, with the HECM lending limit attaining a new high of $1,089,300, a clear indicator of the sustained surge in housing market values. Looking ahead, the limit is poised for another substantial increment in 2024, reaching $1,149,825. These consistent escalations not only reflect a buoyant housing market but also broaden the spectrum of opportunities for individuals exploring reverse mortgages.
| YEAR | NATIONAL HECM LENDING LIMIT | LIMIT INCREASE ($) | LIMIT INCREASE (%) |
|---|---|---|---|
| 2024 | $1,149,825 | $60,525 | 5.56% |
| 2023 | $1,089,300 | $118,500 | 12.21% |
| 2022 | $970,800 | $148,425 | 18.05% |
| 2021 | $822,375 | $56,775 | 7.42% |
| 2020 | $765,600 | $39,075 | 5.38% |
| 2019 | $726,525 | $46,875 | 6.90% |
| 2018 | $679,650 | $43,500 | 6.84% |
| 2017 | $636,150 | $10,650 | 1.7% |
| 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
Comparing 2024 HECM and Jumbo Reverse Mortgages
In choosing the most suitable reverse mortgage program for a borrower, it’s essential to weigh the options between all available programs. Jumbo reverse mortgages, also known as proprietary reverse mortgages, are typically more advantageous for properties with higher market values. With the lending limit now exceeding $1 million, the appeal of a jumbo reverse mortgage becomes more prominent when the home value surpasses $1,250,000, given the current market conditions. While there are various factors to consider when opting for a jumbo mortgage, as a general rule, homes valued above $1,250,000 are prime candidates for this option. Below is a comparative analysis of the HECM lending limits against those of jumbo loans. It’s important to note that for all properties valued above $1,149,825, the HECM limit remains constant.
| HOME VALUE | 2024 HECM | 2024 JUMBO | NET BENEFIT ($) |
|---|---|---|---|
| $1,149,825 | $489,825 | $461,079 | -$28,746 |
| $1,250,000 | $489,825 | $501,250 | $11,425 |
| $1,350,000 | $489,825 | $541,350 | $51,525 |
| 1,500,000 | $489,825 | $601,500 | $111,675 |
| 2,000,000 | $489,825 | $802,000 | $312,175 |
| 2,500,000 | $489,825 | $1,002,500 | $512,675 |
| 3,000,000 | $489,825 | $1,203,000 | $713,175 |
| 3,500,000 | $489,825 | $1,403,500 | $913,675 |
| $4,000,000 | $489,825 | $1,604,000 | $1,114,175 |
(Table based on borrower age 75. HECM Rate used in illustration: 2.00% CMT Margin. Expected rate at time of calculation on 12/5/2023: 6.32%. 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.)
2023: A Year of Change in Real Estate and Mortgages
The real estate and mortgage landscape in 2023 continues to evolve from the previous year and will continue to evolve into 2024. In 2022 and 2023, we witnessed a significant spike in rates, which led to a decrease in the proceeds available from reverse mortgage loans compared to earlier amounts. Additionally, there has been a noticeable softening in the real estate market. However, for homeowners with properties valued over a million dollars, the updated reverse mortgage lending limits introduced a silver lining by offering additional proceeds.
As we progress through 2023 and into 2024, there’s much to appreciate. Reverse mortgages have been a pivotal aid for over a million homeowners, enabling them to comfortably age in place. This financial tool has proven to be a practical solution for many and is certainly worth considering, especially with guidance from a seasoned reverse mortgage professional.
Source:
2024 HECM limit details were published in Mortgagee Letter 2023-22 and will be included in a future Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1) release.