Happy New Year! Some changes are in store for the HECM reverse mortgage in 2024. FHA has made a few tweaks to the HECM program, increased the HECM lending limit, and interest rates continue to fall from their recent peak in October.
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Interest Rates Continue to Fall
Interest rates were a roller coaster in 2023 – to say the least. The 10-year CMT swap rate spiked aggressively during the latter half of 2023, but has since fallen significantly from its October highs.
The swap rate is important because it’s used to calculate the expected interest rate (EIR), which is used to calculate reverse mortgage proceeds. As the swap rate increases, reverse mortgage proceeds decrease. As the swap rate decreases, reverse mortgage proceeds increase. The swap rate has an inverse relationship with reverse mortgage proceeds.
As you can see in the chart below, the swap rate has improved since the end of October. If you applied for a reverse mortgage in October, but felt like you weren’t getting enough money, you may want to apply again. It’s very possible that you’ll be offered significantly more than a few months ago.
A Higher FHA Lending Limit for 2024
FHA periodically revises the HECM lending limit to reflect current real estate market conditions. Last year the HECM lending limit was $1,089,300, but the limit increases to $1,149,825 for case numbers issued on or after January 1, 2024. This change means that many homeowners with higher home values may qualify for significantly more money from a HECM.
The term “lending limit” is somewhat of a misnomer. The lending limit is not a limit on how much you can borrow from a reverse mortgage. Your reverse mortgage will not be called due and you will not be asked to start making payments if your loan balance eventually reaches the limit.
The lending limit is simply a cap on the appraised value for purposes of calculating proceeds. If the lending limit cap increases, then it means homeowners with higher value homes will have access to more equity than before. This change has no impact on homeowners with home values less than or equal to the old lending limit.
The one downside with the higher FHA loan limit for 2024 is that it also increases the maximum IMIP premium, which is based on the lending limit if your home value is equal to or greater than the lending limit. The maximum IMIP premium will increase from $21,786 in 2023 to $22,997 for 2024.
There is no change to the IMIP premium if your home value is less than or equal to last year’s lending limit.
We’ve updated our reverse mortgage calculators to reflect the lending limit change.
Changes to the Annual Occupancy Check
A key HECM requirement is to live in your home for the majority of the year. HUD requires reverse mortgage servicers to verify occupancy on all HECM loans on an annual basis.
In the past, occupancy checks were done only by mail. Your servicer mailed you a form and you simply filled it out and sent it back within 30 days.
In 2023, HUD updated their requirements to allow for a verbal occupancy verification as well. Your servicer can now verify occupancy over the phone instead of requiring you to fill out and mail back a form.
Other Changes
HUD has implemented a few other changes to the HECM, but they primarily impact servicers. Most of the changes appear to be designed to speed up the settlement of reverse mortgage balances when borrowers sell their home or pass away.
If you’re interested in reading about these changes, you’ll find them summarized here.
Alternatives to a Reverse Mortgage
If you’re not sure a reverse mortgage is right for you, there are some alternatives you may want to consider.
- Cash Out Refinance – A cash out refinance can be a great way to tap into home equity with interest rates lower than other loan options. Check out today’s cash out refinance rates.
- Home Equity Line of Credit (HELOC) – A HELOC enables you to borrow against your equity on a revolving basis and at your convenience. Check out today’s HELOC Rates.
- Home Equity Agreement (HEA) – No monthly payments and no interest charges even if you don’t have perfect credit. Trustpilot-rated “Excellent”. Not available in all states. Check eligibility now.
If you’d like to see how much you can get from a reverse mortgage, be sure to check out our reverse mortgage calculator.
(Updated for 2024) The Reverse Mortgage Revealed: An Industry Insider’s Guide to the Reverse Mortgage
Author Mike Roberts is the founder of MyHECM.com and a successful veteran of the reverse mortgage industry. Roberts cuts through all the nonsense, rumors, and hype you may have heard about reverse mortgages in his latest edition of The Reverse Mortgage Revealed: An Industry Insider’s Guide to the Reverse Mortgage.
Writing in plain language, Roberts offers the inside scoop about how a reverse mortgage really works. This book is jam-packed with information and insights that only an experienced industry professional can offer. You’ll discover:
- How a reverse mortgage really works.
- Who should (and shouldn’t) get a reverse mortgage.
- Common myths and misconceptions.
- Little-known insider tips and tricks the lenders don’t tell you (and you probably won’t learn anywhere else).
- How to increase your payout and reduce closing costs (this alone is worth the cost of the book).
- What payout options are available and how they work.
- What pitfalls to avoid.
- Why some applicants get approved and some don’t.
- How to finance a home purchase without a mortgage payment (yes, this is for real!).
- What to expect during the application, approval, and closing process.
Also included are detailed case studies based on real-life scenarios that tie key concepts and terms together. You’ll see for yourself how you can use a reverse mortgage to enjoy a more financially secure retirement.
This is the reverse mortgage book you’ve been looking for! Get the latest edition of The Reverse Mortgage Revealed on Amazon in paperback or for your Kindle. Get it today!
