HECM Loan Limits 2024: A Comprehensive Guide to Home Equity Loans

The HECM loan limit for 2024 is $1,089,300, which is a significant increase from the 2023 limit of $970,800. This change will impact many homeowners who are considering a home equity conversion mortgage.

For many homeowners, the HECM loan limit may be a major consideration when deciding whether to tap into their home's equity. The loan limit is based on the lesser of the home's value or the maximum loan limit.

The HECM loan limit is determined by the Federal Housing Administration (FHA) and is adjusted annually to reflect changes in the housing market. This means that the loan limit may vary depending on where you live and the value of your home.

A HECM loan is a type of reverse mortgage that allows homeowners to borrow money using the equity in their home.

The loan is insured by the Federal Housing Administration (FHA), which means it's backed by the government.

HECM loans can be used for a variety of purposes, including paying off existing mortgages, covering living expenses, and funding home repairs.

Homeowners can borrow up to a certain percentage of their home's value, which is determined by their age and current interest rates.

For example, a 62-year-old homeowner with a $200,000 home might be eligible to borrow up to $120,000.

A Reverse Mortgage is a product that allows homeowners to tap into their home equity, but it's not the same as a Home Equity Conversion Mortgage (HECM).

All HECM's are a type of Reverse Mortgage, but not all Reverse Mortgages are HECM's.

The FHA Home Equity Loan, also known as the HECM loan, is a federally-insured loan that lets homeowners tap into their home equity. It's a type of reverse mortgage, which means the borrower doesn't have to make monthly payments as long as they live in the home.

The HECM loan limit has recently increased to $1,209,750 across the country, up from $1,149,825. This means homeowners can borrow more money against their home's value.

There are six different options for HECMs, including single disbursement, term disbursement, tenure disbursement, line of credit, a combination of term and line of credit, and a combination of tenure and line of credit.

Here are the six options in more detail:

The maximum claim amount (MCA) is the lesser of your home's appraised value or the maximum HECM loan limit, which is now $1,209,750.

To be eligible for a HECM loan, you must be at least 62 years old and occupy the property as your primary residence. You'll also need to have sufficient equity in the property, not be delinquent on any federal debt, and have financial resources to pay ongoing property charges.

The maximum claim amount, or MCA, is the lesser of your home's appraised value or the maximum HECM loan limit, which is now $1,209,750 across the country.

To give you a better idea of how the increased loan limit affects you, let's consider a hypothetical example. For a 69-year-old borrower with a home worth $1.5 million, the available loan proceeds (principal limit) in 2023 would be $397,594, while in 2024 it would be $419,686, an increase of $22,092.

Here's a breakdown of the HECM loan limits for 2023 and 2024:

The increased MCA means borrowers can tap more equity from their properties using a HECM, giving them more choices and alternatives to proprietary or jumbo reverse mortgages. This competition benefits both borrowers and lenders, particularly for higher-value homeowners who can access additional equity.

The HECM loan limit has increased to $1,209,750 across the country, up from $1,149,825. This means the maximum claim amount (MCA) has increased by $59,925.

The MCA is the lesser of your home's appraised value or the maximum HECM loan limit. This increase in loan limit provides more choice for homeowners, especially those with higher-value homes.

Here's a comparison of the available loan proceeds for a 69-year-old borrower with a home value of $1.5 million and an expected rate of 7.0%:

This increase in principal limit can benefit those taking out a new HECM and those refinancing an existing HECM, potentially saving them from having to bring funds to closing.

Home Valuation is a crucial factor in determining the HECM loan limit. The FHA requires that the home be valued at or above the maximum claim amount, which is currently $822,375 in high-cost areas.

A home's value is typically determined by an appraisal, which is an independent evaluation of the property's worth. This process can take a few weeks to complete.

The appraiser will consider factors such as the home's condition, size, location, and comparable sales in the area to determine its value. They may also review recent sales of similar properties to ensure the home is priced fairly.

A low appraisal can impact the loan limit, so it's essential to understand what factors affect a home's value.

The HECM loan limit varies by location, and it's not just about the maximum claim amount (MCA). In fact, the MCA is the lesser of your home's appraised value or the maximum HECM loan limit.

The good news is that the FHA recently increased the HECM loan limit across the country to $1,209,750. That's a significant increase of $59,925 from the previous limit of $1,149,825.

If you're considering a HECM loan, it's essential to understand how location influences the limit. For example, in some areas, the maximum HECM loan limit may be lower than the national limit, so be sure to check the specific limits for your area.

The national HECM loan limit of $1,209,750 is the maximum amount you can borrow, but it's not the only factor to consider. Your home's appraised value will also impact the amount you can borrow.

The HECM loan limit has increased to $1,209,750 across the country, up from $1,149,825. This is welcome news for homeowners who can now tap more equity from their properties using a HECM.

The maximum claim amount (MCA) is the lesser of your home's appraised value or the maximum HECM loan limit. This means that borrowers can access additional equity compared to previous years.

The HECM limit was $1,089,300 in 2023, but is now $1,149,825 in 2024. This increase benefits lenders who don't offer a proprietary reverse mortgage loan product.

A higher principal limit can benefit those taking out a new HECM and those refinancing an existing HECM. In some cases, achieving even a slightly higher principal limit can mean the difference between being short to close or not.

Here are the increased HECM loan limits for 2024:

The increased HECM loan limit is applicable to all areas, including the special exception areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands. This means that borrowers in these areas can also tap more equity from their properties using a HECM.

The HECM loan limit increase for 2024 is a significant change that can impact eligible borrowers. The maximum claim amount has increased from $1,089,300 in 2023 to $1,149,825, effective for FHA case numbers assigned on or after January 1, 2024.

This increase can benefit borrowers with higher home values, as lenders use the lesser of the appraised home value or the current HECM limit to calculate the principal limit. The principal limit, in turn, determines the amount of money the borrower can access.

For example, a 69-year-old borrower with a home worth $1.5 million and an expected rate of 7.0% can access up to $419,686 in 2024, compared to $397,594 in 2023, an increase of $22,092.

The key factors determining payout for a HECM loan are age, rates, and home value. The age of the youngest borrower or eligible non-borrower spouse plays a significant role in determining the principal limit, with younger borrowers qualifying for less HECM loan proceeds.

The long-term interest rate, or expected rate, also factors into the principal limit calculation. For adjustable-rate HECMs, lenders typically arrive at the expected rate by adding the weekly average of the 10-year Constant Maturity Treasury (CMT) index to a margin that the lender sets.

A higher expected rate produces a lower principal limit, while a lower expected rate produces a higher principal limit. For example, if John and Sarah both have similar home values and meet all other eligibility criteria, Sarah, who is 82 years old, may qualify for a larger loan amount due to her shorter remaining life expectancy.

Lenders use the lesser of the appraised home value or the 2024 HECM limit of $1,149,825 to determine the maximum claim amount (MCA). This means that if a borrower's home is worth more than the HECM limit, the MCA will be capped at the limit amount.

A reverse mortgage can be a complex financial product, and understanding the costs involved is crucial before making a decision. The upfront loan fees can add up quickly, as seen in our example where the total upfront loan fees were $13,047.

This amount includes the financing fees and the initial mortgage insurance premium, which in our example was 2.5% of the property's value, totaling $10,000. The remaining $3,047 was attributed to the financing fees.

The cash distribution to the borrower in our example was $232,553, which is the amount left after subtracting the upfront loan fees from the total loan amount of $245,600. This loan amount is calculated by subtracting the Equity Reserves of $154,400 from the property's value of $400,000.

As the years go by, the balance on the loan increases due to the 8% interest rate, as seen in our example where the balance increased to $265,985 in just one year.

The limit increase is a good thing. The FHA recently announced that the HECM loan limit is now $1,209,750 across the country, up from $1,149,825.

This means that the maximum claim amount (MCA) has increased by another $59,925. The MCA is the lesser of your home's appraised value or the maximum HECM loan limit.

For homeowners with higher-value homes, this increase is especially welcome. It helps fill the gap between the HECM product and jumbo reverse mortgages, also known as non-government proprietary reverse mortgage products.

Here's a hypothetical comparison of a 69-year-old borrower using the principal limit factor table supplied by the FHA and utilized by all HECM lenders:

This shows an increase of $22,092 in available loan proceeds. This can be a significant difference for homeowners taking out a new HECM or refinancing an existing one.

For example, if a borrower owned a home worth $1,200,000 previously, their value was previously capped at the HECM lending limit of $1,149,825. But with the new higher lending limit, they would today have access to an estimated $604,875.

The government increased the maximum claim amount by $59,925, perhaps because so much has been done over the past few years to manage risk. This increase allows a greater amount of your home's value to count in the calculation.