Reverse Mortgage, Can It Be Refinanced?

Have you considered taking a reverse mortgage on your home? Is now an appropriate time to think about a reverse mortgage?

Can I refinance a reverse mortgage or am I stuck with the terms I agreed to the first time? These are all questions to consider when looking at your retirement income or a significant change in your income. In order to make the best decision for your circumstances, it’s wise to look at the issue closely so you know how to proceed for your reverse mortgage to be refinanced.

What Is a Reverse Mortgage?

A reverse mortgage is an ideal financial option if your home is paid for and you would like access to the equity now, without having to move or sell your home on the market. A reverse mortgage gives an older homeowner the option of receiving payments from the lender for the mortgage, which are backed by equity in the house. Interest will accrue on the loan, but it is deferred, along with repayment, most often until you and your spouse (if named) die or choose to sell the home.

Is it Smart to Refinance a Reverse Mortgage?

Before you sign your name on the dotted line, consider if any of these four conditions are true:

  1. Has a significant amount of time passed since you first took your reverse mortgage? If so, the interest rates may have changed, and you could possibly save some money by refinancing.
  2. Is your home worth more than it was when you first took your reverse mortgage? If you’ve made improvements to your home or the market has swung your way, your house may be worth more than it was before. This could make you eligible for more money in the form or a reverse mortgage refinance payment.
  3. Do you have a spouse to add to the contract? Perhaps you took out the reverse mortgage solely in your own name and you would like to add your spouse. This is important if you want to make certain your spouse can stay in the home and receive the monthly payment should you move into a nursing facility or when you die. On a brighter note, perhaps you’ve gained a spouse since you took out the reverse mortgage and you simply want to include them on the documents.
  4. You may be able to change from an adjustable rate mortgage to a fixed rate. This can save you from ballooning interest at the end of the loan life.

Smart Tip: Pay close attention to the interest rate if you refinance your reverse mortgage. If the interest rate goes up, you could be paying more than you are currently. This could decrease the amount of your monthly payment.

Can I Refinance a Reverse Mortgage?

Just like most other financing options, a reverse mortgage can be refinanced. Keep in mind, any lender is going to expect some sort of benefit for approving your reverse mortgage. After all, lenders make their money by leveraging on your desire or need for money. The general rule to decide if you can obtain refinancing is called the 5-5 rule, which says both of the following must apply:

  • The amount the principal amount increases must be either equal to or more than five times the amount of the closing costs.
  • The proceeds of your loan must equal or be more than 5% of the total amount you are refinancing.

Refinancing also has requirements regarding how long you have lived in your home since the last time you had a reverse mortgage. And, you must meet all the original conditions the HEMC had when you first qualified for your original reverse mortgage loan. These include being 62 years old, living in the home as your primary residence, owning the home or having substantial equity in the home, not owing any federal debt or delinquencies and being able to maintain the upkeep, including property taxes and physical maintenance of the home.

Of course, the property also needs to meet the basic requirements. You must own and occupy the single-family dwelling, there cannot be any safety or health hazards and if the property is in a high-risk flood zone, proper insurance must be carried.

Can I Save Money with a Reverse Mortgage?

Any time you consider a financing option for your home, you must consider all the relevant factors. We’ve laid several of the most important rules out above. In addition, you and your spouse, if you have one, will want to consider your health, your future plans and your dreams for retirement. Depending on the current economic factors including the interest rate, you may be able to save a significant amount of money by refinancing your reverse mortgage.

Don’t you owe it to yourself to find out the ins and outs of your potential reverse mortgage refinance? You can find out how things look for your personal situation by contacting the team at Galaxy Lending Group. Our team will give you clear, easy to understand answers to all your questions about refinancing a reverse mortgage loan. Contact us today!