With reverse mortgages, everyday terms related to loans and loan amounts can mean very different things than what you normally would expect.
The maximum principal limit that you can get with a HECM reverse mortgage is based on a HUD formula that considers three primary factors: the age of the youngest borrower, the maximum claim amount and the expected average mortgage interest rate.
The minimum age for any borrower is 62 so this is a HUD eligibility requirement so the loan application cannot even go forward unless every person shown as an owner on the property deed is age 62 or older.
These are the major factors used to determine how much money you can get from an HECM reverse mortgage, for instance any lender can do an accurate calculation based on the information you give them about your personal situation. The basic rule is that the older the youngest borrower, the lower the prevailing interest rates, and the higher the cost of housing in your area, the higher the principal limit on a HECM reverse mortgage.
Age is a primary consideration because the longer the life expectancy of the youngest borrower, the more servicing fees, mortgage insurance premiums, and interest will be charged to the loan balance over the life of the HECM reverse mortgage. Because these costs and fees are expected to take a bigger bite out of the principal limit there is going to be less cash available to the borrower.
The maximum claim amount is a cap on the principal limit of a HECM reverse mortgage. This cap is set at the lesser of your home's appraised value or the FHA maximum loan amount for houses in your geographic area. Think of this as the zip code cap and know that generally urban areas get higher caps than rural areas, and some urban areas get higher caps than others.