How Much Money Can You Get From a Reverse Mortgage in South Dakota?
By Jeff Buum, Certified Reverse Mortgage Specialist (CRMS) | Fairway Heartland | Sioux Falls, SD | NMLS #400290
jeffbuummortgage.com · 9 min read · Reverse Mortgage
"How much would I actually get?" is almost always the first question South Dakota homeowners ask when they start exploring a reverse mortgage. It's the right question, and it deserves a real answer rather than a vague "it depends."
The truth is that it does depend on several factors. But those factors are specific, understandable, and calculable. According to Jeff Buum, a Certified Reverse Mortgage Specialist at Fairway Heartland, understanding what drives the number gives homeowners a realistic sense of what a reverse mortgage might look like for their situation.
The Three Factors That Determine Your Loan Amount
The amount you can borrow through a HECM reverse mortgage is determined by three primary factors:
Your age (or your younger spouse's age): the older you are, the more you can borrow as a percentage of your home's value, because older borrowers have a shorter expected loan term.
Your home's appraised value: a licensed FHA appraiser assesses your home's current market value. The loan amount is based on the lesser of the appraised value or the FHA lending limit, which in 2026 is $1,249,125 for all U.S. counties.
Current interest rates: lower rates generally mean a higher loan amount; higher rates reduce the amount available, because the calculation must ensure the loan can be repaid from the home's future value.
These three factors feed into a formula that produces the Principal Limit, the total amount you are eligible to borrow. You then receive a portion of that based on the payment option you choose.
What Is the Principal Limit Factor?
HUD calculates a "Principal Limit Factor" (PLF) based on your age and current interest rates. This factor — expressed as a percentage — is multiplied by your home's appraised value (up to the lending limit) to produce your total loan eligibility. As a general reference for South Dakota homeowners: borrowers in their late 60s to early 70s typically qualify for roughly 35 to 40 percent of their home's appraised value, and borrowers in their late 70s and beyond may qualify for 40 to 45 percent or more. These percentages shift with interest rates.
These are general reference ranges only. Your actual Principal Limit Factor is calculated precisely based on your specific age and current market interest rates at the time of application. Jeff Buum calculates exact numbers for every client in consultation, at no cost and no obligation.
Illustrative Examples for South Dakota Homeowners
The following examples are illustrative only and based on approximate figures. Actual loan amounts depend on your specific age, current interest rates, appraised home value, and any existing mortgage balance.
| Scenario | Age | Home value / price | Estimated result |
|---|---|---|---|
| Example A | 68 | $280,000 | Principal limit ~$100,000; no existing mortgage; available proceeds ~$86,000; monthly option ~$600/month for life. |
| Example B | 74 | $350,000 | Principal limit ~$136,500; $60,000 existing mortgage paid off first; available proceeds ~$61,000; line-of-credit option grows over time if unused. |
| Example C | 70 | $450,000 | Principal limit ~$166,500; $80,000 existing mortgage paid off first; available proceeds ~$68,000; combination of lump sum plus growing line of credit. |
| Example D (HECM for Purchase) | 72 | $325,000 | Principal limit ~$121,000; estimated required down payment ~$219,000; HECM covers the rest; $0 monthly mortgage payment; remaining savings preserved for retirement. |
What Reduces the Amount You Receive?
Several things reduce the net proceeds you receive at closing:
Existing mortgage balance: if you have an outstanding mortgage, the reverse mortgage pays it off first, and the remaining proceeds come to you.
Upfront costs: the FHA mortgage insurance premium (2% of home value), origination fee, appraisal, and closing costs are typically financed into the loan rather than paid out of pocket — but they do reduce the net amount available.
Initial disbursement limits: in the first 12 months, HUD limits how much of the principal limit you can draw — typically 60% — to protect borrowers from exhausting their equity too quickly.
How Payment Options Affect What You Receive
How you choose to receive your proceeds also affects the total value you get over time:
Lump sum: the maximum amount upfront as a fixed disbursement; the entire loan draws immediately and begins accruing interest from day one. Best for paying off large debts or making significant purchases.
Monthly payments (tenure): equal monthly payments for as long as you live in the home; payments continue even if the loan balance exceeds the home's value, because FHA insurance covers the difference.
Monthly payments (term): payments for a fixed period you choose; higher than tenure payments for the same reason a 10-year annuity pays more than a lifetime one.
Line of credit: funds available to draw as needed; the unused portion grows at the loan's interest rate, so the longer it's left unused, the more is available. Often the most flexible and valuable option for long-term planning.
Combination: any mix of the above. Many South Dakota clients take a modest lump sum to pay off an existing mortgage and establish a growing line of credit for future use.
The Best Way to Find Out Your Number
Online HECM calculators can give a rough estimate, but they can't account for the nuances of a specific situation, exact age, the home's actual condition and appraised value, current interest rates at the time of application, and how any existing mortgage balance affects net proceeds. The most accurate way to find out is a no-obligation consultation, where Jeff Buum runs the numbers for a homeowner's home, age, and goals and walks through every option in plain language.
Before running your numbers, it’s worth stepping back to consider whether a reverse mortgage is right for your situation.
Frequently Asked Questions
What's the average reverse mortgage amount in South Dakota?
There is no single average; the amount depends on your age, your home's appraised value, current interest rates, and any existing mortgage that must be paid off first. Borrowers in their late 60s to 70s often qualify for roughly 40–55% of home value.
Do rising South Dakota home values increase what I can get?
Often, yes. Because the loan is based on appraised value up to the FHA lending limit, appreciation across the Sioux Empire can increase the equity available to long-tenured homeowners.
Are reverse mortgage proceeds taxable?
Reverse mortgage proceeds are generally not considered taxable income, but you should confirm your specific situation with a tax professional.
Ready to see your actual numbers? Let's run them together.
Jeff Buum · (605) 321-7303 · jeff.buum@fairwaymc.com · jeffbuummortgage.com/reverse-mortgage
Copyright©2026 Fairway Independent Mortgage Corporation (“Fairway”) NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency. Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUD-approved agency. The youngest borrower must be at least 62 years old. Monthly reverse mortgage advances may affect eligibility for some other programs. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.
