Fannie Mae has raised its lending limits for 2020 and HUD has followed suit with the Home Equity Conversion Mortgage (AKA Reverse Mortgage or HECM). As of January 1st, 2020, **the new Lending Limit is $765,600.** This is great news for many potential borrowers who were unable to qualify when the Principal Limits were lowered in October of 2017.

It is important to understand that **the ***Principal*** Limit is the maximum loan amount and the ***Lending*** Limit** is one of 3 factors used to calculate the maximum loan amount, which are:

The age of the youngest borrower,

The interest rate offered by the lender, and

The

*lesser of*the Lending Limit or the appraised value of your home.

**Thus, the Lending Limit only applies if the appraised value of your home is greater than $765,600.** Here’s an example of how that works:

Age: 72

Interest Rate: 3.5%

Factor Used: 0.555

If the appraised value of your home is $2,000,000 then the maximum loan amount would be calculated using the Lending Limit of $765,600 times the factor of 0.555 which would limit the maximum loan amount to $424,908.00.

Despite this ceiling on access to equity, falling interest rates have begun to compensate for the sharp cuts imposed in October of 2017. So, if you were previously denied a reverse mortgage because your existing mortgage balance was too high, and you own a higher-value home, **you may now be able to qualify for a HECM without having to bring cash to the table.**

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