Did you know that you can refinance a reverse mortgage? Why would someone want to refinance? Well, the reasons are plentiful, but let's hit a few of the more common ones. Along with that, we will cover some of the steps needed to complete your HECM to HECM refinance.
1. The home is worth more now.
Don't laugh; it actually happens, even in this down real estate market. While most people would think that the higher value is due to appreciation in real estate, a reverse mortgage can be different. Depending on when you got your loan, there were county limits on how much your home could be valued for. There were many limited value loans done on homes that were valued higher than the reverse loan would allow.
2. Improve your interest rates.
Whether you had a higher fixed interest rate or a variable loan, refinancing can get you a better interest rate, or a fixed one. With fixed interest rates below 5%, you might be surprised about what is available
3. You need more money.
Sometimes the money just doesn't last, and with a lower interest rate or higher values, you can get the extra money needed to maintain a healthy retirement. This could be used for anything from repairs and maintenance, to just some extra monthly income to help cover your monthly living expenses.
With the reverse mortgage programs that are available, there are options to have virtually no fees. You already paid the mortgage insurance if you did a HECM reverse mortgage, and you won't have to repay it. Origination fee can usually be waived if you are taking the fixed interest rate programs, but you might even get them waived if you just want a line of credit.
Counseling is required. I know you already did it, but it will have to be done again. This time though, they are going to be more intrusive about your finances. It will be necessary to complete a budget with your counselor, to determine the benefit to you.
There is something called a tangible net benefit also. This is a term used to make sure you are getting a loan that benefits you enough to make the loan worth doing. Sometimes this benefit requirement can be a hurdle instead of a help. We will be covering more on tangible net benefit in future articles.
You can see from the above information that a refinance is possible and sometimes worth doing. If you have a reverse mortgage and you think there is a benefit to you, speak to a knowledgeable loan officer and see what is available.
