2023 Reverse Mortgage Limits Reach All-Time High
"Don't wait. The time will never be just right." –Napoleon Hill
Every year HUD reviews the national reverse mortgage lending limit for the HECM program and determines the amount based on home prices for the preceding year. Based on this data, the 2023 HECM reverse mortgage lending limit will be $1,089,300.
History of HECM Lending Limits
HUD Lending limits typically move with home values. After the change in 2008 that first moved the lending limits to a national limit of $417,000 (from regional limits based on regional values) the limit took another large increase in 2009 to $625,500, due to the Housing and Economic Recovery Act.
It stayed at this limit for the next 8 years until 2017 when it rose just $10,650 to $636,150. Not a significant increase, but it meant that the price or housing was indeed going up. And from there, the increases kept coming. In 2018 the HUD HECM limit went to $679,650, an increase of $43,500.
In 2019 the HECM lending limit rose another $46,875 to $726,525 and reverse mortgage borrowers started to really enjoy the benefits of refinancing their HECM loans. In 2020 the limit increased again to $756,600 – up $39,075.
History of HECM Lending Limits
HUD Lending limits typically move with home values. After the change in 2008 that first moved the lending limits to a national limit of $417,000 (from regional limits based on regional values) the limit took another large increase in 2009 to $625,500, due to the Housing and Economic Recovery Act.
It stayed at this limit for the next 8 years until 2017 when it rose just $10,650 to $636,150. Not a significant increase, but it meant that the price or housing was indeed going up. And from there, the increases kept coming. In 2018 the HUD HECM limit went to $679,650, an increase of $43,500.
In 2019 the HECM lending limit rose another $46,875 to $726,525 and reverse mortgage borrowers started to really enjoy the benefits of refinancing their HECM loans. In 2020 the limit increased again to $756,600 – up $39,075.
History of Reverse Mortgage Limits
Covid Impact on Appraised Values & Lending Limits
Then during the Covid pandemic, property values continued increasing. In 2021, the HECM limit increased to $822,375 representing an increase of $56,775. Then against all odds, the country exhibited huge housing price growth in 2022 and the HUD limit grew to $970,800, a single increase of $148,425!
This was the largest single increase that was not a result of a legislative change in the way the limit would be determined (in 2008 the limit was raised because of the Economic Stimulus Act that established the national limit of $417,000 and in 2009 the increase was the result of the House Economic Recovery Act).
This was a single limit increase based solely on the appreciation of home prices.
Comparing HECM to Jumbo Reverse Mortgage Limits
This is the first time that the HUD Home Equity Conversion Mortgage (HECM or “Heck-um”) limit has ever hit the $1,000,000+ mark. The 2023 limit increase gives borrowers with properties valued more than $1,250,000 a viable option to proprietary or jumbo reverse mortgage options, and one of the highest increase in percentage in the past several years!
2023 HECM vs Jumbo Comparison
It is true that borrowers with houses worth more than $1,089,300 may consider a proprietary product instead of a HECM once the property reaches or exceeds that limit, but since the HUD HECM program allows borrowers a greater percentage of their property’s value in the loan amount, the loan makes sense for most borrowers even beyond the HUD lending limit in most cases.
The reason we say “most cases” is because the proprietary programs still allow borrowers to access cash differently than the HUD programs so it is always best to talk to your reverse mortgage specialist to determine which programs will meet your needs.
First Time in History HECM Limit Reaches $1M+
So now, in 2023, the new limit will be $1,089,300. This is an increase of $118,500! This increase is based on data derived on the growth of house prices prior to the rise in interest rates, but many markets are already seeing signs of price softening.
If the prices erode further as is almost certainly the case with higher interest rates, future lending limits may be reduced. The higher lending limits help some borrowers with higher existing mortgages to retire, especially at a time when interest rates are chipping away at borrowers’ available principal limits.
Many borrowers are surprised to see that the loan amounts for which they were eligible for at the beginning of the year are different now after the inflationary changes and interest rate increases.
For those borrowers with higher valued homes, a rise in the 2023 reverse mortgage lending limit is a welcome bit of good news!
Source: 2023 HECM limit details were published in Mortgagee Letter 2022-21 and will be included in a future Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1) release.