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​Are you interested in a reverse mortgage in the new year? FHA loan limits for the FHA Home Equity Conversion Mortgage (HECM) loan program for 2021 have been published on the FHA and HUD official sites. These loans are sometimes referred to as FHA Reverse Mortgages.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

FHA Home Equity Loan Limits for 2021 Announced

December 8, 2020

FHA Home Equity Loan Limits for 2021 Announced
Are you interested in a reverse mortgage in the new year? FHA loan limits for the FHA Home Equity Conversion Mortgage (HECM) loan program for 2021 have been published on the FHA and HUD official sites.

Home Equity Conversion Mortgages are sometimes referred to as FHA Reverse Mortgages. These loans are offered to borrowers age 62 or older who either own their homes outright or are very close to doing so. Thes borrowers must financially qualify for the HECM loan the same as with any purchase or refinance loan and certain restrictions apply for those approved for the reverse mortgage.

FHA HECM loans have no monthly payments. This is a home loan that offers cash from the loan based on terms the borrower will agree upon with the participating lender. 

FHA reverse mortgages usually become due in full when the borrower dies or sells the home. If the borrower dies, the home is sold and the proceeds go to the lender to satisfy the mortgage.

The loan may also be declared due in full if the borrower quits using the property secured by the HECM loan as their primary address or if the borrower fails to satisfy other loan requirements. Borrowers use escrow to pay property taxes, any applicable Homeowner's Association fees and other expenses where applicable. HECM loans require the borrower to occupy the home as the primary residence.

The FHA official site says with an FHA HECM the borrower can withdraw a portion of a home's equity. The amount that will be available for withdrawal varies by borrower and depends on:
 
  • Age of the youngest borrower or eligible non-borrowing spouse.
  • Current interest rate.
  • Lesser of appraised value or the HECM FHA mortgage limit or the sales price.

FHA HECM loan limits in 2021 will be higher than in 2020. The FHA/HUD official site states the “maximum claim amount (HECM limits) for reverse mortgages will increase to $822,375 from $765,600.”

HECM loan limits work differently than FHA forward mortgage loan guaranty limits. FHA.gov, explains how HECM limits work:

“FHA’s current HECM regulations do not allow the HECM limit to vary by MSA or county; instead, the single HECM limit applies to all HECMs regardless of where the property is located.”

FHA HECM loan limits / maximum claim amount limits for calendar year 2021 are not available for case numbers assigned in 2020; they are offered effective for case numbers assigned on or after January 1, 2021.

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