A few weeks ago, we shared the good news that FHA has increased its HECM Lending Limit for 2023.
The increase from $970,000 to $1,089,3000 went into effect on January 1, 2023 and is one of the biggest increases in the history of the FHA program. It’s also the first time the lending limit has topped $1 million. And while this news is definitely positive and has been well-received across the industry – what exactly does it mean for you?
Simply stated: the higher the lending limit, the more cash available. This is undoubtedly the top implication of the new lending limit for you as a borrower.
Regardless of home value, the maximum amount of proceeds that you’d be able to receive from a HECM reverse mortgage in 2022 was limited by the lending limit of $970,800. Since this amount has now been increased to $1,089,3000 – this is especially good news for homeowners with higher value homes. For example, in 2022 a 75-year-old homeowner with a home value of $975,000 or above would have had their home valued capped at $970,8000 and qualified for $459,188 in available proceeds. However, now under the new lending limit, this same borrower could have their entire home value realized and qualify for $515,238 in proceeds – a notable increase of $56,050*!
But aside from the possibility of qualifying for additional reverse mortgage proceeds under the new lending limit, there are several factors that make now the ideal time to move forward with a reverse mortgage loan. After all, today’s market environment certainly won’t last forever.
- Lock in Home Values Before They Decline
The principal limit (amount of reverse mortgage proceeds available) and home value share a congruent relationship. Amidst rising home values over the past year, many homeowners have found that they can qualify for more proceeds than before. However, these high home values may not last forever. In fact, home values already have begun to level off and even decline in some major markets. With this decline anticipated to continue through 2023, it’s a smart idea to proceed with your reverse mortgage today to “lock in” your higher home value. With a higher home appraisal, you’ll ultimately be eligible for more cash. If your home value decreases in the future, your funds will not be affected since you would have proactively locked in your home’s appraised value when it was higher.
- Get Ahead of Potential Anticipated Interest Rate Spikes
Interest rates serve a dual purpose with reverse mortgages because they impact not only how much you’ll pay in interest – but also how much in proceeds you’ll be eligible to receive. Since the HECM program is highly sensitive to interest rates, you’ll want to pay close attention to these rates. With rates always fluctuating, some forecasts are calling for interest rates to rise even further in 2023. And since interest rates and the principal limit have an inverse relationship, the lower your interest rate, the more funds you’ll be eligible to receive.
- Be Better Equipped to Manage Inflation
After years of relatively low inflation, this past year has shown a surge in prices just about everywhere. As mentioned previously, since home values are higher, you could potentially tap into more reverse mortgage proceeds than previously available. And since reverse mortgage proceeds can be used however you wish, these additional funds can be used to keep more money on hand to pay for rising bills and expenses – everywhere from the grocery, to the gas pump, to the pharmacy.
- Lock in Home Values Before They Decline
A new, higher HECM lending limit, coupled with these other factors make now an advantageous time to move forward with a reverse mortgage.
Isn’t it time to revisit or see how much you may qualify for in proceeds?
At Longbridge Financial, we’re here to help. Our team of Loan Officers are experienced in the business and are committed to recommending the reverse mortgage program only once certain the program is right for you and your unique needs. We’ll get to know you, your goals, your home, and your financial situation as we assess all options and guide you through the process. Rest assured – if we ever feel that a reverse mortgage is not your best option, we will tell you so. Not all lenders make this pledge.