Maximum claim amount (MCA)

Reverse Mortgage Maximum Claim AmountThe reverse mortgage maximum claim amount (MCA) is used to calculate proceeds and is equal to either the appraised value of the home or the FHA lending limit, whichever is less.

For example, if the value of the home is $300,000, the maximum claim amount equals $300,000. If the home value exceeds the FHA lending limit, then the maximum claim amount equals the lending limit.

How maximum claim amount impacts proceeds

The MCA is the starting point for determining the proceeds available from a HECM reverse mortgage. Borrowers qualify for a certain percentage of the MCA based on age and the expected interest rate. To see how this works, let’s check out a few examples.

Example #1: Home value is less than the lending limit

Let’s assume the appraised value of the home is $300,000. Because the value is below the lending limit, the maximum claim amount equals $300,000 as well.

Let’s also assume the expected interest rate is 4.50% and the age of the youngest borrower is 70. Using our principal limit calculator, we discover that the principal limit factor (as of this writing) for an expected interest rate of 4.50% and an age of 70 is 0.493, or 49.3%. We multiply 49.3% by the MCA as follows:

$300,000 (MCA) * 0.493 (PL factor) = $147,900 (principal limit)

As you can see, the principal limit for this example works out to be $147,900. The principal limit is the initial pool of cash available to pay off existing mortgage balances, cover closing costs, and be allocated to the borrower as lump sum, line of credit, or term/tenure income.

Example #2: Home value is more than the lending limit

Now let’s assume the appraised value of the home is $1,500,000. Because the value is more than the lending limit, the maximum claim amount equals the lending limit, which at the time of publishing is $726,525.

Let’s again assume the expected interest rate is 4.50% and the age of the youngest borrower is 70. We already know from the example above that the principal limit factor for an expected interest rate of 4.50% and an age of 70 is 0.493, or 49.3%. The principal limit for this example is calculated as follows:

$726,525 (MCA) * 0.493 (PL factor) = $358,177 (principal limit)

The principal limit for this example is $358,177. As you can see, the lending limit effectively caps the appraised value (and the MCA) for purposes of calculating proceeds.

Check out our free reverse mortgage calculator

How much can you get from a reverse mortgage? Check out our free HECM reverse mortgage calculator. It's simple to use, fast, free, and no contact information is required. You can access the reverse mortgage calculator here. Our HECM for purchase calculator can be found here.