Reverse Mortgage Policy Changes Increase Principal Limits and Protect Non-Borrowing Spouses

If you have been considering accessing the equity in your home with a Home Equity Conversion Mortgage (HECM) loan, now may be a great time to act. A recent policy change may mean that you can qualify for more loan proceeds. HUD recently released Mortgagee Letter 2014-12 which included new Principal Limits Factors (PLF) for non-borrowing spouses under the age of 62. As part of these changes, HUD has also revised the PLF tables for all HECM loans. Under the new Principal Limit, borrowers:

  • 64 and older will be eligible for more funds.
  • between the ages of 62 and 63 will be eligible for slightly lower funds. The chart below reflects  the dollar change in Available Funds based on different home values and borrowers ages using a 5% interest rate (PLF Tables Effective 8/4/2014)

Changes in available funds (principal limit factor)

The next chart shows the percentage change from the old limits to the new limits, also assuming a 5% interest rate. At age 90 and beyond, there has been an increase of 9% over what was previously available. This is great news especially for someone who may have tried for a reverse mortgage previously and was short to close.

Principal limit factor changes in percentages

Why was the change made?

HUD recently updated it’s policy regarding non-borrowing spouses on a reverse mortgage loan. With the new change, non-borrowing spouses receive additional protections, allowing them to remain in the home, even if the borrowing spouse passes away, as long as certain conditions are met at the close of the loan and throughout the life of the loan.

What do all these changes mean to you?

If you are in the process of obtaining a reverse mortgage or have been considering a reverse mortgage and you are 64 years or older, it’s good news as you will qualify for more proceeds than previously allowed.To find out exact details on how the changes will impact you, please call MLS Reverse Mortgage toll free at 1-888-888-4834 or apply online.