FHA has increased the Maximum Lending Limit for the Home Equity Conversion Mortgage (HECM) for 2019 from $679,650 to $726,525. This is the third year in a row that FHA has increased the lending limit.
HUD calculates this figure at 150 percent of the conforming loan limits on mortgages to be acquired by Fannie Mae and Freddie Mac, which was announced by the Federal Housing Finance Agency (FHFA) late last month to be $484,350 for calendar year 2019—up from $453,100 in 2018.
In reverse mortgage language, the maximum lending limit is known as the Maximum Claim Amount (MCA). This is the maximum value that lenders can use when calculating the amount that they can loan on a HECM loan. Lenders base the amount they can loan on three factors:
- Age of the youngest spouse
- Expected interest rate
- Value of the home (up to the MCA)
For example, if you have a $1 million home and are able to receive 47% of the value of the home (up to the MCA), the lender will not give you $470,000. You will only receive 47% of the MCA ($726,525), which is $341,467.
However, the change can still benefit homeowners who have a large mortgage to pay off and were not able to get enough money under the lower limit of $679,650. This increase allows homeowners to tap additional equity. In the example above, the homeowner can access an additional $22,000 that she could not under the lower limit.