Reverse Mortgage Limits Increase in 2004

Reverse Mortgage Loan Limits Increase in 2004

Seniors will be able to qualify for larger reverse mortgages beginning January 1 because of new, higher loan limits, according to the National Reverse Mortgage Lenders Association. The increases will affect two reverse mortgage products: the federally insured Home Equity Conversion Mortgage (HECM), which accounts for roughly 90 percent of all reverse mortgages made in the United States, and the Fannie Mae Home Keeper loan. 

A reverse mortgage is a unique loan that enables senior homeowners to convert part of the equity in their homes into income without having to sell the home, give up title, or take on new monthly mortgage payments. Reverse mortgages are available to individuals 62 or older who own their home. Funds obtained from the reverse mortgage are tax-free.

Borrowers can choose to receive reverse mortgage fund as a lump sum, monthly income, or line of credit, or as a combination of monthly income and line of credit. Borrowers can use the funds anyway they wish – for home repairs and improvements, medical expenses, in-home care, education, and supplemental retirement income. No mortgage payments are due during the life of the loan. The loan becomes repayable when the borrower sells the home or permanently moves out. In addition, the repayment amount can never exceed the value of the home.
Fannie Mae recently announced that its loan limit for single-family mortgages – which includes Fannie Mae Home Keeper reverse mortgages – will rise in 2004 to $333,700 from the prior limit, in 2003, of $322,700.

The loan limits will also increase in 2004 for the HECM product, a reverse mortgage insured by the Federal Housing Administration, a part of the U.S. Department of Housing and Urban Development. However, HUD must first issue an FHA Mortgagee Letter before the new HECM loan limits take effect. A letter should be forthcoming just after the New Year.