Refinancing a reverse mortgage (HECM to HECM)

Considering a Reverse Mortgage Refinance? Here’s What You Need to Know! 

While a reverse mortgage (HECM) is typically viewed as the ultimate mortgage for homeowners, there are instances where refinancing can be advantageous. This article delves into the specifics of refinancing existing federally-insured reverse mortgages (HECM).

Favorable Market Conditions Can Create Opportunities

Low interest rates and increasing home values can present a chance to refinance your HECM and gain additional cash. Let’s examine some critical factors influencing your eligibility:

Your Age: HECM loan amounts are partly determined by age. As you grow older, you may qualify for a larger loan, allowing room for the loan balance to grow over time.

Interest Rates: Decreased interest rates can substantially boost the total loan amount and available proceeds. If current rates are significantly lower than when you initially secured your HECM, especially if it was a fixed rate, refinancing could prove beneficial.

Home Value Appreciation: A substantial increase in your home’s value since obtaining your initial HECM, coupled with low interest rates, might enable you to refinance, pay off the existing HECM, and still access additional cash.

Other Considerations

Existing HECM Balance: Since HECM borrowers typically don’t make monthly payments, the balance grows over time. If you acquired your first loan during a period of lower interest rates, your current outstanding balance may be more favorable.

The Refinancing Process: Refinancing entails a new loan application, appraisal, HUD counseling, and underwriting.

FHA Mortgage Insurance: You’ll receive a credit on your upfront FHA mortgage insurance premium based on your home’s current value.

Seek Professional Guidance

Refinancing a HECM is a multifaceted decision. The potential benefits should outweigh the refinancing costs. It’s highly advisable to consult with a trusted financial advisor to ensure you’re making an informed choice.