FREE Report: Learn how the HECM can help you live better in retirement. Click here to download.

Reverse Mortgage Glossary

Principal Limit (PL)

The principal limit is the total amount of proceeds initially available to a reverse mortgage borrower. The principal limit is determined by multiplying a principal limit factor, or PL factor, by the maximum claim amount (equal to the appraised value for most borrowers).

As an example, let’s assume the maximum claim amount is $300,000 and the PL factor is 0.50 based on the youngest borrower’s age and the expected interest rate (EIR). The PL factor is multiplied by the maximum claim amount to arrive at an initial proceeds amount of $150,000 (0.50 * $300,000), which is the principal limit. These proceeds would then be divvied up to cover existing mortgage balances, closing costs, required property charges, and any allocations to the borrower in the form of cash or line of credit.

Was This Informative? Please Share!

Download a FREE Report About the HECM

Get the straight deal on what a HECM is, how it works, and how it can help you live better in retirement. Enter your email address below and click 'Download'.

We respect your privacy and won't spam you. You can unsubscribe at any time.