Can I refinance a reverse mortgage with a new reverse mortgage? The answer is sometimes. And it depends upon the current equity in the property.
Home values have risen quite a bit over the last two years, in some communities here in Southern California as much as 20% per year! In a situation like this I have found that some of my prior clients have built up enough equity due to appreciation that they can refinance their existing reverse into a new reverse and tap into a bigger line of credit, higher monthly payouts or even more cash out.
How does it work?
Basically, FHA will not allow a homeowner to refinance their reverse mortgage into a new reverse mortgage unless the benefit to the homeowner is five times greater than the cost of the new reverse. In some cases I have been able to provide my clients with a “free” refinance covering all of their closing costs. I am not always able to do this, but it does happen. Here’s one example.
Mr. and Mrs. H of Pasadena got their first reverse mortgage 2 and half years ago when their home was worth $545,000. This time around it appraised for just over $700,000. Based upon the increase home value they were able to qualify for a growing line of credit $30,000 higher than their existing line of credit AND I was able to do the loan for them at no cost except for the counseling fee of $125.00. Even better, the new reverse mortgage (an adjustable rate loan) had a rate cap of 5% and the old reverse’s cap was a 10%. This means that their interest on the new reverse will never be higher than 7.5% instead of 12.5% cap that was on the prior loan. New reverse mortgage products are now available that might be more suitable and/or beneficial for the homeowner.
If your home has gone up in value and you are interested in finding out if you can refinance your existing reverse mortgage please click on the link beloww, fill out the form here and I will get back to you quickly with an answer either way.
By Deborah Nance
Your Local Southern California Reverse Mortgage Professional
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iReverse Home Loans, LLC, NMLS#810502 originates reverse mortgages in Alabama, Alaska, Arizona (MB-0919584), California, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon (ML-5378), Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont (1164-MB), Virginia, Washington and Wisconsin.
Important Information: Reverse Mortgages are neither "endorsed" nor "approved" by the Federal Government. The FHA (Federal Housing Administration) provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM loans; the FHA does not make or originate loans. The owner(s) retain title to the property that is the subject of the reverse mortgage until the person sells or transfers the property and is therefore responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts or failure to maintain the condition of your property may cause the reverse mortgage loan to become due immediately. A reverse mortgage is a complex loan secured by your home. Whether such mortgage makes sense for you depends on your financial situation and needs. For these reasons, we strongly recommend that you consult with a qualified independent housing counselor, family members and other trusted advisers before making this decision. This website is not from HUD or FHA and was not approved by HUD or any government agency.