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Reverse Mortgage Limits 2020 – HECM Loan Limits Increase for 2020

Reverse Mortgage Limits 2020 – HECM Loan Limits Increase for 2020

FHA announced in Mortgagee Letter 2019-20  that they will be increasing the reverse mortgage lending limits for

HECM Loan Limits 2020
HECM Loan Limits 2020

2020.  The HECM loan limits, aka HECM Max Claim Amount had hovered at $625,500 for years.  However, this does mark the 4th year in a row that HUD has increased the reverse mortgage limit, aka max claim amount.

The former loan limit for 2019 was $726,525.  FHA has set the new new reverse mortgage limit at $765,600 for 2020.  This will apply to any case numbers issued on January 1, 2020 and beyond.

What exactly does this mean though?  This can be confusing for some people. In fact, even seasoned forward loan officers misinterpret what this means.  This new $765,600 limit is often confused with the actual face value or loan amount one can attain.  That’s not how it works though.

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So, What Exactly IS the HECM Maximum Claim Amount?

It is actually pretty simple.  The HECM maximum claim amount represents that maximum appraised value that can

Reverse Mortgage Loan Limits 2020
Reverse Mortgage Loan Limits 2020

be used for a FHA Reverse Mortgage.

Let’s look at an example.  Let’s say that at your age, you’re eligible to borrow 50% of the appraised value.  Keep in mind, this 50% figure is hypothetical for ease of use and understanding. In a case where a borrower’s home is worth $100,000.00, they can borrow $50,000 total.  If this same person’s home is worth $200,000.00, then they can borrow $100,000.  This is the case all the way up to the max claim amount of $765,600.

Let’s do the math on that; $765,600 x 50% = $382,800.  So, for this person, the maximum reverse mortgage loan amount is $382,800.  Keep in mind, this only pertains to FHA reverse mortgages. There are now 5 different lenders that now offer jumbo reverse mortgages and we work with all of them.

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Reverse Mortgage Maximum Loan Amount

We now know the  HECM maximum claim amount doesn’t really translate in the maximum loan amount one can take.  However, I bet you’re wondering what FHA’s reverse mortgage maximum loan amount is.  We’ll put a chart below that illustrates this.  Keep a few things in mind though.  Firstly, the amount changes at every age bucket.  A 62 year old gets a different amount than a 63 year old.  A 63 year old gets a different amount than a 64 year old, etc.  It increases a little bit every year up until age 92.

There is a second thing to keep in mind.  The percentage of the appraised value any one age bracket can borrow changes weekly.  It won’t change dramatically, but it DOES change weekly based on the performance of certain interest rates.

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Maximum Reverse Loan Amount 2020 Chart

Remember, this chart illustrates the maximum face value amount a person can get.  It’s different than the max claim amount which is really just the max appraised value considered.  Also, for simplicity, we just did it for every 10 years starting at age 62.  IF your age is somewhere in between, you’ll get different amounts.  Consult with your loan officer to find out how much you can access..

Maximum Reverse Mortgage Loan Amount 2020
Maximum Reverse Mortgage Loan Amount 2020

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