If you have a reverse mortgage, you can refinance it to get a lower interest rate or convert it into a traditional mortgage. However, there are some restrictions and requirements that you need to be aware of before you decide to refinance your reverse mortgage.

let’s review what a reverse mortgage is. A reverse mortgage is a type of home loan that allows you to borrow money against the equity in your home. The loan does not have to be repaid until the borrower dies, moves out of the home, or sells the home.

Now that we’ve reviewed what a reverse mortgage is, let’s discuss whether or not you can refinance it. In general, you can refinance a reverse mortgage. However, there are some restrictions and requirements that you need to be aware of before you decide to refinance your reverse mortgage.

  1. First, you need to have enough equity in your home to qualify for a refinance. If you do not have enough equity, you may not be able to get a new loan or you may have to pay a higher interest rate.
  2. Second, you need to have good credit in order to qualify for a refinance. If you have bad credit, you may not be able to get a new loan or you may have to pay a higher interest rate.
  3. Third, the value of your home must be greater than the amount of your outstanding loan balance. If your home is worth less than the amount of your loan, you will not be able to refinance your mortgage.
  4. Fourth, you must have a steady income in order to qualify for a refinance. If you are self-employed or have an irregular income, you may not be able to get a new loan or you may have to pay a higher interest rate.
  5. fifth, the closing costs associated with a refinance can be expensive. You will need to pay for an appraisal, title insurance, and other fees. You should compare the costs of refinancing your mortgage to the savings you will receive from a lower interest rate to see if refinancing is right for you.

How can refinancing protect a non-borrowing spouse?

If you are married and your spouse is not on the mortgage, they may not be protected if you pass away. If you have a reverse mortgage and you die, your spouse may not be able to stay in the home unless they can pay off the loan. If you have a traditional mortgage, your spouse will be protected if you die because they can assume the loan.

If you have a reverse mortgage and you want to protect your spouse, you can refinance the mortgage into a traditional mortgage. This way, if you die, your spouse will be able to stay in the home and they will not have to worry about paying off the loan.

Another benefit of refinancing your reverse mortgage is that you can convert it into a traditional mortgage. This can be a good option if you want to move or sell your home in the future. With a traditional mortgage, you will have more flexibility and you will not have to worry about the loan balance growing larger over time.

Reasons on why you would refinance a reverse mortgage

There are a few reasons why you might want to refinance your reverse mortgage.

First, you may want to get a lower interest rate. If interest rates have decreased since you got your mortgage, you may be able to save money by refinancing.

Second, you may want to convert your reverse mortgage into a traditional mortgage. This can be a good option if you want to move or sell your home in the future. With a traditional mortgage, you will have more flexibility and you will not have to worry about the loan balance growing larger over time.

Third, you may want to get rid of private mortgage insurance (PMI). If you have a traditional mortgage, you may be required to pay PMI if you have less than 20% equity in your home. If you refinance into a reverse mortgage, you will not have to pay PMI.

Fourth, you may want to change the terms of your loan. For example, you may want to extend the term of your loan so that you can lower your monthly payments.

Fifth, you may want to access the equity in your home for a different purpose. For example, you may want to use the equity in your home to pay for home improvements or medical expenses.

Is reverse mortgage refinancing right for you?

Before jumping into a reverse mortgage refinance, identify if it will help you with your financial goals. You’ll want to ask yourself the following questions:

  • What are your current financial goals?
  • What are the terms of your current reverse mortgage loan?
  • How much equity do you have in your home?
  • What are the current interest rates?
  • What are the costs of refinancing?

By taking a close look at your unique financial situation, you can determine if refinancing your reverse mortgage loan makes sense for you.

Pros and cons of refinancing a reverse mortgage

There are both pros and cons to refinancing your reverse mortgage. Before making a decision, weigh the costs and benefits to see if it’s the right move for you.

Pros:

  • You may be able to get a lower interest rate: If interest rates have decreased since you got your mortgage, you may be able to save money by refinancing.
  • You may be able to convert your loan into a traditional mortgage: This can be a good option if you want to move or sell your home in the future. With a traditional mortgage, you will have more flexibility and you will not have to worry about the loan balance growing larger over time.
  • You may be able to get rid of private mortgage insurance (PMI): If you have a traditional mortgage, you may be required to pay PMI if you have less than 20% equity in your home. If you refinance into a reverse mortgage, you will not have to pay PMI.
  • You may be able to change the terms of your loan: For example, you may want to extend the term of your loan so that you can lower your monthly payments.
  • You may be able to access the equity in your home for a different purpose: For example, you may want to use the equity in your home to pay for home improvements or medical expenses.

Cons:

  • You may have to pay closing costs: There may be fees associated with refinancing your loan, including appraisal fees, title insurance, and origination fees.
  • You may end up with a higher interest rate: If interest rates have increased since you got your mortgage, you may end up with a higher interest rate if you refinance.
  • Your monthly payments could increase: If you extend the term of your loan, your monthly payments could increase.
  • You may not be eligible for a reverse mortgage refinance: There are certain requirements that must be met in order to qualify for a reverse mortgage refinance. These include having an appraised value that is equal to or greater than the outstanding loan balance, and having a good payment history on your existing loan.

As you can see, there are both pros and cons to refinancing your reverse mortgage. Be sure to carefully consider your options before making a decision.

How to refinance a reverse mortgage?

If you’ve decided that refinancing your reverse mortgage is right for you, there are a few steps you’ll need to take.

  • First, you’ll need to find a lender who offers reverse mortgage refinance loans. Not all lenders offer this type of loan, so it’s important to shop around.
  • Once you’ve found a lender, you’ll need to get your home appraised. The appraisal will help the lender determine how much equity you have in your home.
  • Next, you’ll fill out an application and provide the necessary documentation, such as proof of income, property taxes, and insurance.
  • Once your loan is approved, you’ll need to sign the loan documents and close on the loan.

Just like with any other type of loan, be sure to speak to an IMI Financial Group Mortgage Broker to help you compare rates before refinancing your reverse mortgage.

Published On: January 30th, 2023 / Categories: Mortgage, Mortgage Refinance, reverse mortgage /

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