Reverse Mortgage Glossary
Reverse Mortgage Principal Limit Factor, PL Factor
The reverse mortgage principal limit factor, or PL factor, helps determine how much you can receive from a HECM reverse mortgage. It is a key component of the calculation that determines the percentage of the value of your home that the lender will lend.
How PL factors are used
Principal limit factors are percentage values published in tables by the Federal Housing Adminstration (FHA) for purposes of calculating HECM proceeds. The appropriate principal limit factor is selected by the lender based on the age of the youngest borrower (or non-borrowing spouse) and the expected interest rate (EIR). The selected PL factor is then multiplied by the maximum claim amount (usually equal to the value of the home) to determine the principal limit. The principal limit is the initial pool of cash available through the HECM reverse mortgage.
As an example, let’s assume the maximum claim amount is $300,000 and the PL factor 0.50 based on the youngest borrower’s age and the EIR. The PL factor is multiplied by the maximum claim amount, which results in a principal limit of $150,000 (0.50 * $300,000).
The principal limit is the initial pool of cash available to pay existing mortgage balances and closing costs. The remaining portion of the principal limit is available to the borrower in the form of lump sum, line of credit, and term or tenure income.
Principal limit factors tend to increase with age. This means that older borrowers tend to qualify for more money than younger borrowers.
PL factors also increase as EIR decreases. This means that the HECM tends to offer more money when interest rates are low.
PL factor calculator
If you would like to lookup PL factors or calculate principal limits based on various expected interest rates, check out our principal limit calculator.
Reverse mortgage principal limit factor tables
If you would like to download the FHA PL factor tables, you can find the links here. Note that the files are in a Microsoft Excel format.