What is the Maximum Loan Amount for Reverse Mortgages?
Please note, the information on this page is intended for educational purposes and is subject to change. Consult a licensed reverse mortgage lender for the most up-to-date information.
Home Equity Conversion Mortgages (HECMs), also known as Reverse Mortgages, allow homeowners age 62 and older to access their home’s equity to increase cash flow, pay off debt, or even fund the purchase of a new home. There are strict rules for getting a reverse mortgage and not everyone will qualify. One of the rules is that the loan must fall below a certain limit.
What are HECM loan limits?
HECMs are insured by the federal government, and as such are regulated to prevent irresponsible and predatory lending as well as protect lenders from severe loss, in the event that the borrower can’t repay the loan. Part of this regulation involves the government setting loan limits for the amount of money an HECM can cover.
Current Limits for HECMs
Loan limits for reverse mortgages have changed over the years. The maximum loan amount on a traditional HECM reverse mortgage was originally as low as $200,000. Then in 2009, Congress passed legislation that raised the limit to $625,500. At the time of this writing, the loan limit stands at $636,150.
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What if I need a reverse mortgage that is above the HECM limit?
HECM products are limited by the strict rules set forth by the government. If you need to get a reverse mortgage that is beyond $636,150, then you will need to look into getting a jumbo reverse mortgage or proprietary reverse mortgage.
Jumbo reverse mortgages and proprietary reverse mortgages are reverse mortgages that are not insured by the federal government but are instead backed by private companies. Because they are not insured by government dollars, they are not required to adhere to the government’s loan limits. However, they are still heavily regulated and are typically more expensive (and therefore more of a risk) than the federally-backed HECM reverse mortgage.
Since jumbo reverse mortgages allow you to borrow more money, you’re faced with having to pay more in interest. To help ease the interest burden, many high-value homeowners choose to receive their reverse loan proceeds as a line of credit, where they are only required to pay interest on the money they actually use. And since all reverse mortgage borrowers are free from having to make mortgage payments during the loan term, those who only used a portion of their reverse loan through a line of credit are less likely to leave an enormous balance owed once they no longer live in the home.
See “How Does Repayment Work With a Reverse Mortgage” for details.
Alternatives to Jumbo Reverse Mortgages
As an alternative to jumbo mortgages, you may want to consider other options like a home equity loan, home equity line of credit, personal loan secured by the home’s value, mortgage refinancing, or simply downsizing to a more affordable home. Talk to a financial planner for advice on the best route to take to secure your financial well-being.