Refinance a Reverse Mortgage

Refinancing a reverse mortgage is just what it sounds like: getting a new mortgage to change your loan terms or replace an existing loan. Like a traditional refinance, borrowers will need to qualify for the reverse refinance by meeting specific eligibility requirements. It is important to make sure your reverse mortgage is always competitive to what is available in the market and if rates change for the better, you want to make sure to take advantage of that.

Do you have questions about refinancing your reverse mortgage and if it makes financial sense? Contact us today to learn more!

Reverse Refinance Borrower Protections

Unlike a traditional refinance, there are specific protections that a reverse mortgage lender must follow that help to ensure that a reverse refinance is beneficial to the borrower. This prohibits lenders from unnecessarily refinancing a borrower or proceeding with terms that are not favorable to the borrower.

Why Refinance a Reverse Mortgage?

There are a multitude of reasons to refinance a reverse mortgage. Generally, the most common reasons for a reverse refinance are an increase in your home value, changing your loan payout, lowering your interest rates, or adding a spouse as a borrower to the loan.

Home Value Increase

If your home's value has increased considerably, you can refinance your existing reverse mortgage and tap into the extra equity that has accrued on the home since the first reverse mortgage was established.

Change Your Payout

Reverse mortgages pay out differently depending on the loan type. For example, if you have a fixed-rate reverse mortgage, the lender will pay proceeds as a single lump sum and no further proceeds will be dispersed. On the other hand, an adjustable-rate reverse mortgage allows borrowers to receive their funds as equal monthly installments for the life of the loan, for a set period of time, or as a line of credit they can draw from as needed.

Borrowers are in control of how they receive HECM proceeds. They can change their payment options with their servicer as they need to throughout the life of the loan.

Change Your Loan Type

If you need to change your reverse mortgage loan type, you can do so with a reverse refinance. There are two types of reverse mortgages:

Home Equity Conversion Mortgage (HECM) — This is the most common type of reverse mortgage, which is insured by the federal government.
Jumbo Reverse Mortgage — These loans, backed by private lenders, typically allow borrowers to qualify for larger amounts.

Lower Interest Rate

With a reverse mortgage, the lender makes payments to the borrower. This decreases home equity and increases the loan balance (principal). If you refinance your reverse mortgage at a lower interest rate, this can reduce the rate of equity decrease, as well as the amount of interest the lender adds to the loan.

Add a Spouse

Borrowers must be at least 62 years old to qualify for a reverse mortgage. If a spouse who wasn’t old enough for the original reverse mortgage now qualifies, the only way to put their name on the loan is to refinance the HECM and add the other person as a Borrower. This would enable the new Borrower to take full advantage of the program and have access to the loan proceeds after the other Borrower passes away.

Heir Ownership

Reverse mortgages must be repaid when the borrower(s) permanently move from the home or pass away, which is usually accomplished by selling the property and using the funds from the sale. The balance that is due on the loan will never be more than the home’s appraised value when the loan becomes due. However, if the heirs choose to maintain home ownership, they can refinance their reverse mortgage into a traditional mortgage.

Do you have questions about how a refinance could benefit you? Our experts are here to listen to your unique situation and help you determine if a refinance is right for you.

How to Refinance a Reverse Mortgage

Here’s a step-by-step list of the reverse refinancing process:

Make sure you’re eligible — Different loans come with different eligibility requirements. If you’re refinancing into another reverse mortgage, your eligibility will be based on age, your home’s value, interest rate, and how long it has been since your last reverse mortgage. If you’re refinancing into a traditional forward mortgage, eligibility hinges on your income, credit rating, and interest rate and details from your most recent reverse loan details. Call our team of experts today to learn more!
Understand your options — Not all lenders offer the same loans or interest rates, so you’ll want to talk to a reverse expert to make sure you find the one that best meets your needs and preferences.
Go through counseling — Even if you already attended a counseling session for your original reverse mortgage, you’ll have to attend again if you refinance your reverse mortgage more than 5 years after your first HECM. If you have your Counseling certification from your previous reverse mortgage loan you may be able to avoid another round of counseling.
Apply for your new loan — Once you’ve selected a loan program and attended counseling, you’ll need to formally apply by completing an application.
Appraisal, escrow, and underwriting — An appraiser will visit your home to determine its value, a title report will be ordered, and an underwriter will review your documentation for approval just as they did in the first reverse mortgage process.
Closing and disbursement — Upon receiving final approval, you’ll sign your loan documents, and the lender will fund your new mortgage.

Ready to get started?

Our team of experts is here to walk you step-by-step through the process.

How Much Does it Cost to Refinance a Reverse Mortgage?

How much you’ll pay to refinance your reverse mortgage depends on a variety of factors, including the mortgage type, lender, and property value. Breaking down the costs, here are some of the most common:

Appraisal fee — The appraisal fee allows a professional appraiser to visit your home and assess its value. A second appraisal may be required by the FHA in some situations.

Closing costs — These are the same closing costs related to a conventional loan and may all incur a fee ranging from $20- $600 each. These fees include title insurance, document preparation, credit reports, and obtaining property information.

Origination fee — Origination fees largely depend on the property’s value, but the FHA caps all HECM origination fees at $6,000.

Service fee — The FHA charges a .5% fee on the loan balance annually.

Counseling fee — These sessions cost less than $200 and are about 45 minutes to an hour long. You may be able to have the fee waived depending on your financial situation.

Can You Refinance a Reverse Mortgage to a Conventional Mortgage?

Yes, you can refinance a reverse mortgage into a conventional mortgage.

Keep in mind that instead of the lender making mortgage payments to you under a reverse, you’ll make payments to the lender under a conventional mortgage.

As with any other loan, you’ll need to meet eligibility requirements.

Want to learn more? Contact our team of reverse mortgage experts today to get started on your reverse refinance.

Reverse Mortgage Refinancing