How Much Can You Get From a Reverse Mortgage Loan?
By: Courtney Jorstad
February 5, 2023 • 3 minute read
How Much Can I Get from a Revere Mortgage Loan?
A reverse mortgage loan is an innovative way to convert the equity in your home into cash.
But before you decide to apply for a reverse mortgage, you may want to know how much you can expect to receive.
When it comes to a reverse mortgage, there isn’t just one simple answer because how much you can get depends on several variables.
The Reverse Mortgage Principal Limit
The most common type of reverse mortgage is the Home Equity Conversion Mortgage (HECM). This is also the only type of reverse mortgage that is insured by the Federal Housing Administration (FHA).
Because HECM reverse mortgages are backed by the federal government, it has created rules and guidelines around how they work including how to calculate how much homeowners may borrow.
The amount you are able to borrow with a reverse mortgage is called the principal limit.
This is calculated based on the age of the youngest borrower, the interest rate, and the maximum claim amount.
We will go over these factors plus others that may affect how much you are able to borrow with a reverse mortgage.
Age of the Youngest Borrower
Borrowers must be at least 62 years old to qualify for a reverse mortgage. If there is more than one homeowner, the amount they are able to borrow is based on the age of the youngest borrower.
The FHA Reverse Mortgage Maximum Claim Amount
The FHA puts a limit on how much homeowners may receive from a HECM reverse mortgage. As of 2023, the max limit is $1,089,300.
This means that reverse mortgage borrowers are not allowed to borrow more than that amount for their reverse mortgage if they want it backed by the FHA.
Higher lending limits are offered through proprietary products such as jumbo loans that in some cases go up to as much as $4 million. These are proprietary loans that are backed by the lender. However, they are not FHA-insured.
Home Value
The value of your home is one of the factors that will determine the principal limit.
One of the required steps in the reverse mortgage process is to obtain an appraisal of your home. This step will identify your home’s current market value and any repairs that need to be made.
The more your home is worth, the more you will be able to receive.
Funds Distribution Options and Your Payout
With a reverse mortgage, qualified homeowners have the option of receiving their money in a lump sum, fixed monthly payments, a line of credit, or a combination of the three.
The method you choose can also have an impact on how much you may receive.
- Lump Sum. If you opt to receive your money as a lump sum, you will be charged a fixed-rate on the loan amount. The fixed-rate reverse mortgages typically cost more than an adjustable rate, and it typically means that the payout amount is lower than it is when receiving the funds as a line of credit or monthly payments.
- Line of Credit. If you opt to receive your money as a line of credit, you will be charged an adjustable rate. In addition, borrowers are only charged both interest and fees for the money they withdraw. Borrowers may also qualify for a growing line of credit that increases as it ages.
- Monthly payments. If you opt for monthly payments, these will also be charged an adjustable interest rate. Like a line of credit, you will only pay interest and fees on the funds that have been distributed.
Reverse Mortgage Calculator
Now that you know all about the different variables that can affect how much you can get from a reverse mortgage, a good next step is to use our free reverse mortgage loan calculator.
To get even more detailed information about reverse mortgages, check out our reverse mortgage loan guide.
If you are ready to move forward with a reverse mortgage, we recommend talking to a reverse mortgage loan officer at one of our recommended reverse mortgage lenders.
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