Principal Limit Factor – Reverse Mortgage Glossary

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February 11, 2009

Principal limit factor is a term used primarily in conjunction with the HUD home equity conversion mortgage (HECM) program, the most popular reverse mortgage program. The term is best understood if broken into components:

1. The principal limit of a HECM is the lesser of the appraised value of the home or the FHA “203b” limit that varies by geographic location;

2. A principal limit factor is then applied to adjust the maximum loan amount according to the age of the youngest borrower and the expected mortgage interest rate. These factors are actuarialy detemined – i.e. the older the borrower, the higher percentage of principal limit can be obtained through a reverse mortgage.

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Related posts:

  1. How Age Affects Your Reverse Mortgage Amount
  2. Refinancing Existing Home Equity Conversion Mortgages (HECM) and Revision
  3. Applicable Federal Rate – Reverse Mortgage Glossary
  4. Reverse Annuity Mortgage – Reverse Mortgage Glossary
  5. AIME-Average Indexed Monthly Earnings – Reverse Mortgage Glossary

Glossary

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