By Bill Lyons | Published on May 6, 2025
TABLE OF CONTENTS

    What Is a Reverse Mortgage?

    A reverse mortgage allows homeowners aged 62 and older to convert part of their home equity into cash without selling their home or making monthly mortgage payments. Unlike traditional mortgages where you pay the lender, with a reverse mortgage, the lender pays you.

    You can receive funds as a lump sum, monthly payments, a line of credit, or a combination of these options. The loan becomes due when you sell the home, move out permanently, or pass away.

    Most reverse mortgages are Home Equity Conversion Mortgages (HECMs), which are insured by the Federal Housing Administration (FHA). However, several types of reverse mortgages exist to meet different financial needs. You should understand the pros and cons of reverse mortgages before deciding if this financial tool suits your retirement plans.

    Additionally, some homeowners explore a reverse second mortgage option when they need additional funds beyond their first mortgage. This allows you to tap into more equity while maintaining your original mortgage terms.

    What Is the Principal Limit on a Reverse Mortgage?

    The principal limit represents the maximum amount you can borrow with a reverse mortgage. This figure determines how much money actually reaches your pocket after paying off existing mortgages and loan costs.

    Your reverse mortgage principal limit depends on three key factors:

    • Age: Older borrowers qualify for higher principal limits because lenders expect the loan to be repaid sooner.
    • Interest rates: Lower expected interest rates increase your principal limit, while higher interest rates reduce it.
    • Your home’s value: The lender will use the lower of your home’s appraised value or the current FHA reverse mortgage lending limits as the maximum claim amount.

    For homeowners with high-value properties exceeding FHA limits, a jumbo reverse mortgage might provide access to more funds, as jumbo reverse mortgage loan limits can exceed standard HECM caps.

    Reverse Mortgage Limits in 2025

    Reverse mortgage limits represent the maximum amount the Federal Housing Administration will insure on a Home Equity Conversion Mortgage. Even if your home is worth more, these limits cap how much you can borrow.

    The 2025 maximum claim amount stands at $1,209,750. This means regardless of your home’s actual value, the FHA won’t insure more than this amount. Your actual loan proceeds will be lower than this cap because the principal limit factor (based on your age and current interest rates) determines what percentage of the maximum claim amount you can access.

    For example, if your principal limit factor is 50% and your home’s value matches the full $1,209,750 limit, you could potentially borrow around $604,875. However, mandatory costs like mortgage insurance premiums and origination fees reduce this amount further.

    If your home value exceeds the reverse mortgage loan limits and you need more money, you might consider looking into a jumbo reverse mortgage. These proprietary loans offer higher borrowing amounts but lack FHA insurance protection.

    Reverse Mortgage Qualification Requirements

    To qualify for a reverse mortgage, you need to meet specific criteria established by lenders and the FHA. These requirements ensure you can maintain your obligations as a homeowner while benefiting from the loan.

    • You must be at least 62 years old (all borrowers)
    • The home must be your primary residence
    • You must have substantial equity in your home (typically at least 50%)
    • You must maintain the property in good condition
    • You must remain current on property taxes and homeowners insurance
    • You must complete a HUD-approved counseling session
    • You cannot be delinquent on any federal debt
    • Your property must meet FHA standards

    The counseling requirement serves as an important protection for seniors. During this session, professionals explain the financial implications and alternatives before you commit to any of the types of reverse mortgages available.

    If you’re considering options to refinance a reverse second mortgage, you’ll need to meet these same qualification standards, plus additional requirements related to demonstrating financial benefit from the refinance.

    See If You Qualify for a Reverse Mortgage

    Ready to discover if a reverse mortgage fits your financial situation? Griffin Funding offers personalized guidance to help you navigate reverse mortgage loan limits and determine how much equity you can access.

    Our experienced loan officers will explain how the principal limit on a reverse mortgage works for your specific situation. We understand that retirement planning requires careful consideration of all available options.

    For a quick assessment, download the Griffin Gold app to access smart calculators, gain a personalized financial picture, and track your home’s value. The app can also help you understand how factors like your age and property value affect your borrowing power.

    Contact Griffin Funding today to learn if you qualify for a reverse mortgage and how this financial tool might enhance your retirement security. Our team will help you weigh the pros and cons of reverse mortgages to make an informed decision that supports your long-term goals.

    Find the best loan for you. Reach out today!

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    Frequently Asked Questions

    What is the maximum amount you can borrow with a reverse mortgage?

    The maximum amount you can borrow depends on your age, interest rates, and home value. For HECMs, the 2025 lending limit is $1,209,750. Your actual loan proceeds will typically range between 40-60% of your home's appraised value (or the FHA reverse mortgage lending limits limit, whichever is lower), after accounting for your principal limit factor.

    What is the 60% rule on a reverse mortgage?

    The 60% rule limits first-year disbursements to 60% of your initial reverse mortgage principal limit. This FHA regulation helps preserve your equity longer and reduces insurance risk. You can access the remaining 40% after the first year. Exceptions exist if mandatory obligations (like paying off an existing mortgage) exceed the 60% threshold.

    Are there alternatives to a reverse mortgage?

    Yes, in addition to a reverse mortgage you can also consider:

    • Home equity loans: Provides a lump sum with fixed interest rates and regular monthly payments, allowing you to maintain home equity while accessing cash.
    • Home equity lines of credit: Offers flexible access to funds as needed. Draw up to a certain limit just as you would with a credit card and then repay the borrowed amount during the repayment period. 
    • Cash-out refinance loan: Replaces your current mortgage with a larger loan, giving you the difference in cash while requiring monthly payments.
    Bill Lyons

    Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 23 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 11 years in business.