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HECM Loans - New Lending Limits for Reverse Mortgages

Written by: Troy Shellhammer

Reverse Mortgages can now give you more funds than ever before with a nationwide lending limit elevation on January 1st of 2006. Now borrowers can utilize more of their home's equity without the burden or risk of making monthly payments, and still leave enough value in the home for your heir's legacy.

The Reverse Mortgage is a product that will usually make available around 30-60% of the homes appraised value in the form of a lump sum, a monthly disbursement, a line of credit, or a combination of the three. There are only six Reverse Mortgage variants across the nation, a Reverse Mortgage Lender can do comparisons. Each of these products are designed to perform for different home values or dispersement options. The most common Reverse Mortgage product, the FHA Home Equity Conversion Mortgage (HECM) is the Reverse Mortgage that is being updated with these new lending limits. This is the Reverse Mortgage that is most commonly used because is designed to provide the most funds possible while still using the formulas that are used with all Reverse Mortgages in generating a dollar figure in accordance with the available equity. These variables include the age of the borrower, the value of the home, the interest rate, the county the home is in, and the lending limit.

The minimum lending limit prior to January 1st, 2006 for almost 75% of the country, was around $172,000, while the maximum for any FHA HECM was $312,000. This meant that for most HECM applicants, no matter how much the home was valued over $172,000, the Reverse Mortgage generated an amount based on 30-60% of the that limit. Now that the limits have been looked at and viewed as obsolete and unsuitable, the Reverse Mortgage lending limits to a minimum of $200,160 and a maximum of $362,790. In most cases of individuals applying for a Reverse Mortgage, these increases will add up to and above $25-30,000 dollars more to your Reverse Mortgage estimate. Many individuals who currently have a large mortgage on their home and have looked into doing a Reverse Mortgage, but were unable to efficiently pursue one due to the low lending limits, can now do a re-assessment with a Reverse Mortgage Calculator and have the opportunity to pay off their current mortgage in full.

This also means that for every person applying for a Reverse Mortgage, the amount of tax-free funds available are 10-20% percent higher. That will mean thousands of payment free dollars to be used for retirement, medical bills, and investments. Most senior's largest asset is their home, and the Reverse Mortgage was created to allow seniors a safe way to activate that investment without having to sell their home and move. As of January 1st, the Reverse Mortgage will now be a much more effective way to do that.

About the author:

Troy Shellhammer is a Reverse Mortgage specialist with Next Generation Financial Services, a division of 1st Mariner Bank. He advises seniors on the Reverse Mortgage process and produces Reverse Mortgage loans nationwide. Please visit the Reverse Mortgage Nation website at http://www.reversemortgagenation.com/ or call 1-888-9 REVERSE for any questions, information, or an estimate on what you or your friends and relatives may receive with a Reverse Mortgage.


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