2023 Reverse Mortgage HECM Limits to Surpass $1 Million

ALERT: 2024 HECM Limit Soars to $1,149,825

The reverse mortgage lending limit for Home Equity Conversion Mortgages will surpass $1 million for the first time ever in 2023 under program adjustments set by the Department of Housing and Urban Development (HUD) that are updated annually. The lending limit for 2023 HECM loans insured by the Federal Housing Administration will be $1,089,300, an increase of more than $118,000 over the 2022 lending limit of $970,800.

The HUD lending limit changes year over year to reflect the current housing market and average home price changes that take place in the market. Due to home price increases nationally, the lending limit will expand in 2023 to offer more borrowing potential for reverse mortgage borrowers.

Typically, the HUD lending limit is in line with the conforming lending limits set by the Federal Housing Finance Agency (FHFA) for loans that Fannie Mae and Freddie Mac acquire. While FHFA’s lending limits for forward mortgages are set depending upon geographic location and vary depending on local market home price averages, in contrast, the HECM lending limit is the same across the nation and typically mirrors FHFA’s lending limit for higher-than-average markets. This means the loan limit for HECM reverse mortgages is the same no matter where the borrower lives in the U.S.

In recent years, home prices have risen consistently. According to the Federal Reserve Bank of St. Louis, the median home price of a home sold in the U.S. was $313,000 in 2019. In 2020, that figure rose to $329,000. In 2021, during the pandemic, that median reached $369,800. And by the first quarter of 2022, the median had increased to $433,100. Historic lending limits set by the FHFA and HUD have followed this pattern.

2023 reverse mortgage limits announced

Historical Lending Limits on Reverse Mortgages

Decades ago, the lending limit for reverse mortgages did vary by geography to reflect average regional home values. That changed in 2008 when the HECM lending limit was first set nationally at $417,000. The limit ticked up significantly the following year to $625,500 because of the Housing and Economic Recovery Act (HERA).

The limit remained unchanged at $625,500 for several years before finally increasing to $636,150 in 2017. For each consecutive year that followed, the lending limit rose again ? to $726,525 in 2019; to $756,600 in 2020; to $822,375 in 2021 and finally to $970,800 in 2022. The increase to more than $1 million in 2023 is a historic occurrence that provides even more borrowing power for senior homeowners with high valued homes.

HECM Reverse Mortgage Limits History (2008-2023)

Year	HECM Lending Limit
2008	$417,000
2009-2016	$625,500
2017	$636,150
2018	$679,650
2019	$726,525
2020	$765,600
2021	$822,375
2022	$970,800
2023	$1,089,300

What purpose do lending limits serve?

Lending limits are set by governing bodies and by private lenders to set the maximum amount that can be loaned on a single loan. This is primarily to protect the lender or the loan insurer from making loans that are above a predetermined amount.

In the case of HUD’s lending limits for reverse mortgages, the lending limit is essentially the cap on how much a borrower can borrow against his or her home. As always in the case of reverse mortgages, the loan amount depends on several factors:

The home value
The interest rate
The age of the youngest borrower

The amount that borrowers can qualify to borrow using a reverse mortgage depends greatly on the age of the borrower and home value. The loan limit places an additional parameter on how much can be borrowed. If a borrower’s home is valued well above the lending limit, there will be equity “left on the table” that essentially can’t be accessed through the HECM loan.

In those cases, many private reverse mortgages are in the market with loan limits surpassing the HUD lending limit. These products can present additional borrowing power, sometimes allowing loan limits surpassing $2 million or more. Their terms may vary from HECM loans, however, with different considerations for upfront and ongoing costs, interest rates and borrower requirements, and the percentage of home equity that can be borrowed.

Expanded borrowing potential in 2023

The new lending limit set by HUD will allow some borrowers additional borrowing potential for loans in 2023. For borrowers who may be exploring reverse mortgage options, the new loan limit may help borrowers access more of their home equity in the new year.

The increase in the HECM lending limit and its ability to offer more borrowing potential to HECM borrowers may also make some private reverse mortgages less competitive. It’s important to speak with an experienced loan originator about the different products available and the best fit for each situation.

Looking ahead

In some cases, HUD has changed the lending limit due to legislation, while in most cases, the lending limit is adjusted purely due to changes in average home prices. Because many markets saw unprecedented home price appreciation during the pandemic, the loan limit saw a significant increase ? 18% ? in 2022. However, the loan limit also can go down based on average home prices. If the loan limit falls, the borrowing potential for HECM loans decreases. While no one knows how home prices will change in the years ahead, there may be advantages to taking a reverse mortgage under the 2023 lending limit.

2 Comments on “2023 Reverse Mortgage HECM Limits to Surpass $1 Million”

Admin December 5, 2022

Teri T.December 5, 2022

What percentage of equity can I get from a reverse mortgage in 2023?

- Admin December 5, 2022
  
  ReverseMortgageReviews.orgDecember 5, 2022
  
  Hello Teri,
  
  This is a very loaded question when it comes to reverse mortgages! Reverse mortgages use formulas that takes into consideration the borrowers' ages, interest rates, property values and maximum lending limits per the program to determine the maximum cash for which a borrower will receive for your circumstances.
  There are both HUD programs and private or proprietary programs (often called jumbo) available that set their own limits which would further change this answer based on which works best for the borrower based on the value of their home or their needs.
  HUD limits the amount of cash a borrower can receive at closing or in the first 12 months based on how much is needed for what HUD calls "mandatory obligations". Mandatory obligations are the loans/liens on the property that must be paid off with the loan, costs to get the loan, the purchase price of the home if it is a purchase transaction.
  HUD will limit the cash to the borrower at 60% of the available loan proceeds if the borrower does not need all their funds to pay the mandatory obligations) but they also up to 10% of the loan on top of the mandatory obligations up to the full allowable loan amount for cash in the borrower's pocket if the borrower would not receive any cash at close without the additional 10% allowance).
  
  If the house is worth more than the HUD maximum lending limit of $970,800 (soon to be $1,089,300 on January 1, 2023), then the maximum loan amount will be determined by the HUD limit instead of the actual home value. In other words, even if the home is worth $1,050,000, the loan on the HUD HECM would be determined by the current HUD maximum lending limit of $970,800.
  Two borrowers at the same age with properties valued at $970,800 and $1,100,000 under today's lending limits would receive the same loan amounts. Which would mean that the percentage of the loan to value or the percentage of the equity would be higher on the property valued at $970,800 than on a property valued at $1,050,000 even though the amount of money was the same.
  
  I am sorry this was a little longer than I wanted it to be, but it was so that I could illustrate that there is so much that goes into the determination of how much money the borrower receives. When the interest rates go up, borrowers receive less under the program and when they go down, they receive more.
  Older borrowers receive more as a percentage of their home than do younger borrowers so there is no way to answer your question without knowing a lot more information and preparing a proposal and I also didn't want to just tell you that I couldn't tell you what you asked without explaining why not. But I can do something better for you.
  I can give you a link to our online calculator where you can put in just the pertinent information and see what the loan could do for you based on your circumstances. It only takes a few minutes, it's free and you do not need to use your actual information if you do not wish to (but be sure to use dates that are close to your actual birthdate, etc. so that your results are accurate).

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