New Higher HECM Loan Limits Provide More Choices for Homeowners
For retirees who are interested in tapping into their home equity to help extend their nest eggs, 2020 may be the right time to do so. Beginning January 1, 2020, the U.S. Department of Housing and Urban Development increased the maximum loan amount you can borrow for an FDA-insured reverse mortgage. Home Equity Conversion Mortgage (HECM) limits increased by nearly $40,000—from $726,525 in 2019 to $765,600 in 2020.
A reverse mortgage is a financial product that allows homeowners age 62 and older who either own their home or are very close to owning it, to covert a portion of their home equity to increase their financial security.
What does this limit increase mean for homeowners?
With the increase in the loan limit, a borrower can extract more equity from their home. This is especially beneficial for homeowners who live in areas with higher property values or those may not have been able to qualify for an HECM in the past because they still had a significant mortgage balance. Now, with the higher loan amount, there may be enough money in the HECM loan to pay off the existing mortgage and cover other necessities like medical expenses, home improvements, home health care, education, travel, and most anything.
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More on Reverse Mortgages & Loan Limits
Before the HECM increase, proprietary reverse mortgages were the only option for larger loan amounts because they aren’t FHA-backed and aren’t limited to the same criteria that HECM loans are. Proprietary reverse mortgages, also called jumbo reverse mortgages come with certain risk because they are not government-insured. With the new limit increase, HEMCs can compete with proprietary loans, giving borrowers more options.
If you are a homeowner with a home valued at or near the new 2020 lending limit and think an HECM might be a viable solution to help fund your retirement, speak with a Certified Reverse Mortgage Professional today.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.