New for 2022: Significant Increase in Lending Limits Means More Money’s Possible Out of a Reverse Mortgage

Jan 24, 2022 | Reverse Mortgages

 
You’re not alone if money’s a concern as you think about the future. Reverse mortgages (HECM loans) are a safe and flexible financial tool used by millions of older adult homeowners to solve the common challenges and concerns of retirement.

Now with record-high lending limits, more money’s possible out of a reverse mortgage than ever.

KEY TAKEAWAYS
  • In November 2021, the federal government announced an increase in lending limits for 2022 – from $822,375 to $970,800
  • This increase is the largest ever, after six consecutive years of increases, and higher than expected.
  • Eligible borrowers with high-value homes now have the option of a federally regulated and insured HECM loan.
  • The amount you can borrow with a HECM loan increases as you age, when interest rates drop or when property value rises.
 

Understanding Reverse Mortgage Lending Limits

If you’re age 62 or older and you have a traditional mortgage, you can use a reverse mortgage to pay it off and use the remaining proceeds from that HECM loan just about however you’d like.

Reverse mortgages are a way to access a portion of the equity you’ve built up and convert it to cash without having to sell the home. Reverse mortgage lending limits determine just how large of a portion that can be for borrowers.

In November 2021, the federal government announced an increase in lending limits for 2022 – from $822,375 to $970,800. In other words, eligible borrowers now can access up to $970,800 of home equity. The FHA made these changes in recognition that home values continue to rise at a rapid pace.

What are the Reverse Mortgage Lending Limits in 2022?

This increase is the largest ever, after six consecutive years of increases, and higher than expected. You could turn the home equity you’ve been building for years into new income, and more of it.

Not only is more money available out of a reverse mortgage than ever, but this type of loan now is available to more borrowers. Eligible borrowers with high-value homes now have the option of a federally regulated and insured HECM loan, whereas before they were limited to a proprietary jumbo loan.

This increase expands the range of choices available to borrowers with high-value homes. There is a perception that jumbos cost more than HECMs, but that isn’t necessarily true. There are features of jumbo reverse mortgages that make them cost effective and highly appropriate in some situations.

Getting Started with Reverse Mortgages

If you’re looking to get started with a reverse mortgage, these articles can help guide you through all aspects of the process.

Guide to HECM Loan                                      Reverse Mortgage Limits

Non-Borrowing Spouse Protections              Jumbo Reverse Mortgages

Reverse Mortgage Taxes                                Reverse Mortgages and Heirs

Benefits of Getting or Refinancing a Reverse Mortgage Now That Lending Limits Have Increased

Whether taking out this type of loan for the first time or refinancing an existing reverse mortgage, borrowers can get the most out of a HECM loan when lending limits are at a record high. You’ll have more proceeds to solve the common financial challenges and concerns of retirement faced by many older adult homeowners, including:

  • Outliving retirement savings
  • Living on a fixed income
  • Overly depending on Social Security
  • Rising costs of living
  • Healthcare expenses
  • Ability to enjoy retirement in your own home
  • Unexpected expenses

There are no restrictions on how you can use the proceeds from a reverse mortgage. The funds you receive can be used for most any purpose you’d like, to include:

  • Home renovations
  • Paying off an existing mortgage
  • Home health care
  • Traveling with family
  • Medical expenses
  • Car loans

How Can You Take Advantage of the New Lending Limits?

The expert loan officers at GoodLife welcome the opportunity to guide you through the reverse mortgage process. Our goal is to make it as fast and easy for you as possible. Once we begin working together and you decide getting or refinancing a reverse mortgage is right for you:

  • First step is to review your proposal. Our proposals are packed with information that can be hard to decipher without the help of a reverse mortgage expert. We’ll be happy to answer any questions you have.
  • Next step is for you schedule a counseling session with an unaffiliated agency. These sessions are designed as a safeguard, to make doubly sure you’re able to make a well-informed decision. We will follow up with you afterward.
  • Final step is for us to get an application started. A real estate appraisal is a key feature of the application. From there, our team will move as quickly as possible to close your loan.

As with other real estate appraisals, a reverse mortgage appraisal includes:

  • Visual inspection: the appraiser walks through the home to identify which features may enhance or detract from the home’s value. Appraisers often take photos and notes.
  • Comparative analysis: after a visual inspection, the appraiser compares the home’s features to similar homes in the area to determine a comparative value.
  • Formal documentation: the appraiser will deliver a final appraisal of the home’s value to both lender and borrower.

Keep in mind that the amount you can borrow with a HECM loan increases as you age, when interest rates drop or when property value rises. The method of disbursement can also affect how much money you get. Funds from a reverse mortgage can be delivered to borrowers in a lump sum payment, monthly installments, a line of credit or a combination of all three. Monthly installments and lines of credit have variable interest rates, so the interest and value of your loan will change over time. Lump-sum disbursements often have a fixed interest rate. Upon the first anniversary of your loan, you may also be eligible to access even more cash.

Whether you’re looking into getting or refinancing a reverse mortgage, there’s never been a better time than 2022. With record high lending limits, eligible borrowers may now access up to $970,800 of home equity. This, combined with rising home values, means more money’s possible out of a reverse mortgage than ever. Contact us to get started with a reverse mortgage today!

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