Can You Refinance a Reverse Mortgage?

If you already have a reverse mortgage, you may be wondering if refinancing is a good option. The short response is that refinancing a reverse mortgage is a possibility, and there are some good reasons that you would be considering this option. A mortgage refinance can help you save or access more funds based on your current needs, and it’s the later you’re likely seeking with a reverse mortgage refinance. 

Reverse mortgage allows a qualified homeowner who is 62 years or older to turn some of their equity into funds without yielding their residence or making monthly mortgage payments. 

Can you refinance a reverse mortgage? The answer is yes, and here’s how it works.

Reverse Mortgage Refinancing – An Introduction

Refinancing a reverse mortgage involves swapping out one mortgage for a different one, usually in a search for a more favorable deal or a release of more funds. With a traditional mortgage, refinancing is a good option if interest rates dropped considerably since you signed up for your original mortgage, if a value of a home increased considerably, or if you require access to more funds than you currently access with a particular mortgage.

Knowing when or how to refinance a reverse mortgage can depend on your individual situation. With this in mind, it’s wise to work with a broker who can consider your situation and provide tailored advice.

Eligibility and Qualification

To be eligible for a refinancing of a reverse mortgage, you’ll need to qualify (much like every other application). Refinancing with the Federal Housing Administration is often a positive move, but you’ll need to make sure it suits your finances and long-term goals.

You will be subject to reevaluation for new financial qualification according to re-verification of credit, assets, and income. You will also be subject to housing counseling with a HUD-qualified counselor, as with your initial reverse mortgage.

Your residence also needs to be upgraded to contemporary property standards and pass a new appraisal. If your residence has lost value since you first obtained a mortgage, refinancing may be a bad option. It’s important to carefully consider the costs and benefits of refinancing a reverse mortgage loan​ to ensure it meets your goals.

How Refinancing a Reverse Mortgage Works

Refinancing is very much like getting out your initial reverse mortgage. You will begin by going out to various lenders for rates, fees, and terms on a mortgage. Alternatively, a broker can do this for you. When you make a decision, you will reapply for them with current financials.

The lender will require a new appraisal for a residence in determining a current market value for your residence. This appraisal is important as it determines how much more funds you will be permitted with a refinancing.

When your application gets a thumbs up, you’re included in a closing process that consists of signing new loan documents. The new loan closes out your active reverse mortgage, and you’re paid any amounts additional under your elected payment option—to be paid in a one-time payment-sum, monthly payments, or a line of credit.

Making the Right Call for Your Circumstance

Refinancing a reverse mortgage has a lot to it, but it isn’t necessarily a good option for everyone. Consider your financial requirements now, what you will gain, and how long you plan to stay in your home.

Before you go any further, talk with a reputable mortgage broker or a HUD-qualified housing counselor who will be able to sit with you to see if refinancing long-term is a good option. They will be able to consider figures and talk with you about whether or not possible gains make sense in your individual situation.