Curious about refinancing a reverse mortgage? You’ve come to the right place!
Welcome to Ask the Pros, our blog series that brings valuable insights straight from our incredible team here at Longbridge Financial. Whether you’re considering tapping into your home equity, already have a reverse mortgage in place, or simply want to better understand how these loans work, this series is designed to help you make smart, confident decisions about your financial future.
From demystifying common misconceptions to explaining the fine print, we’re here to offer straightforward, helpful answers to the questions that matter most. Think of this as your personal guide to navigating home equity in retirement.
For this edition of Ask the Pros, we sat down with our own Chris Bahr, Senior Reverse Mortgage Consultant, to explore the ins and outs of refinancing a reverse mortgage.
Let’s dive into the Q&A!
Q: When is refinancing a reverse mortgage a good idea?
A: There are several scenarios where refinancing a reverse mortgage can be the right move. One of the most common is when your property’s value has grown significantly since you first took out the loan. An increased home value can allow you to access even more cash or a higher line of credit,1 which can provide greater financial flexibility and security.
Another common motivator for refinancing is to secure a lower interest rate. In some cases, this may even mean accepting a smaller line of credit,1 depending on market conditions, but the long-term benefit of a reduced rate is often worth it for rate-focused borrowers.
Refinancing can also be a valuable solution if your current loan has a Life Expectancy Set Aside (LESA) or Tax and Insurance Set Aside (TISA). These set-asides, which the Department of Housing and Urban Development (HUD) may require in certain instances, can only be removed by refinancing. If you would prefer to manage these expenses yourself, a refinance is the only pathway to doing so.
Life changes can also prompt a refinance. For example, if you have gotten married or divorced since taking out your original reverse mortgage, you may decide to refinance so you can add your new spouse to or remove a former spouse from the loan (as long as you still qualify). In the case of a new marriage, adding your spouse to the loan can provide important financial protection: if you pass away, the loan will not become due and payable as long as your surviving spouse continues to live in the home and meet the loan obligations.
And of course, broader market conditions always play a role. When interest rates are low, refinancing can offer you the dual advantage of unlocking more home equity while securing more favorable loan terms.
At the end of the day, whatever your motivation, refinancing is a personal and strategic decision that can be a powerful part of your long-term retirement plan.
Q: What costs should be expected when refinancing a reverse mortgage?
A: The costs associated with refinancing depend largely on whether this is your first refinance or a subsequent one. If you are refinancing for the first time, one significant advantage is that you do not pay the Initial Mortgage Insurance Premium (IMIP) again. This fee, equal to 2% of the home’s appraised value, is typically the largest cost in a reverse mortgage transaction. Because it’s waived on a first refinance, the overall IMIP cost is often substantially lower than what you paid at closing the first time around.
Other closing costs vary depending on the current market conditions and your loan type. During the historic low-rate period between 2020 and 2022, many borrowers were able to refinance at little to no cost. Today’s rate environment often requires borrowers to pay some closing costs, but as a lender, we always work to minimize these expenses in any way the market allows.
However, if this is your second refinance, you may be required to pay IMIP. Whatever your circumstances, your Reverse Mortgage Consultant can help you understand the costs and benefits of refinancing to ensure your decision aligns with your goals.
Q: What does the refinance process look like, and how long does it usually take?
A: The refinance process closely resembles the experience of getting your original reverse mortgage, but with a few additional requirements set by HUD. One of the most important guidelines is the “5x rule,” which requires lenders to show that the refinance provides a benefit of at least five times the amount of its closing costs, which we just touched on.
In most cases, this significant benefit comes in the form of an increased loan amount, meaning a larger sum of cash or a higher credit line. While there are exceptions, this rule provides a helpful benchmark to ensure you receive meaningful value.
If you’re refinancing within five years of your original loan, many states allow you to reuse your original reverse mortgage counseling certificate. This means you may not need to complete a new counseling session, saving you time and effort. During the refinance, it’s also common to move from an annually adjusting interest rate to a monthly adjusting one. Depending on your priorities—whether you’re focused on rate stability or maximizing funds—this can be a significant advantage.
If you obtained your initial reverse mortgage from Longbridge, we are often able to reuse certain documents from your original mortgage if you choose to refinance with us as we are also your loan servicer. While updated documentation is always required, reusing what we can helps streamline the process and minimize your efforts.
Overall, the refinance timeline is similar to (or bit shorter than) your initial loan process, though each borrower’s situation can vary.
Q: Could refinancing change the amount of money accessed or received?
A: Yes—refinancing can absolutely change the amount of money available to you, and how it changes depends on the type of loan you refinance into. For reference, Home Equity Conversion Mortgages (HECM) are the most common type of reverse mortgage and are insured by the Federal Housing Administration (FHA). Platinum by Longbridge is our proprietary reverse mortgage typically offering higher loan amounts and other unique features. As part of the refinance process, your Reverse Mortgage Consultant will help you decide which option is a better fit for you before moving forward.
If you’re refinancing your current HECM into a Platinum loan, you’ll likely see more proceeds available due to expanded lending limits and product flexibility—often resulting in more accessible cash at closing.
If you’re refinancing into a HECM loan, your new loan amount can be larger than what you currently have. However, under HUD rules, the amount accessible in the first year may be less than what is currently available to you. After the one-year anniversary of the new loan, the remaining funds become available.
Ultimately, the impact on available funds depends on your goals and the product you’re moving into. Some borrowers prioritize access to cash right away, while others focus on long-term line of credit growth.1,2 This is why every refinance conversation begins with understanding what you’re trying to achieve.
Refinancing is not a one-size-fits-all decision. Our role as Reverse Mortgage Consultants is to listen to what you want to accomplish and help you understand which options align with those goals. Many homeowners call in thinking they want to switch to a fixed rate, but after reviewing the differences between fixed- and adjustable-rate loans, they realize the adjustable option often provides greater long-term benefit for their circumstances—or vice versa.
If refinancing makes sense, it would be our honor to guide you through the process. We’re always happy to outline the pros, cons, and required conditions for a refinance and invite you to check in periodically as the market, your home value, and your financial goals evolve.
Thank you, Chris, for sharing your wealth of knowledge with us!
If you’re interested in learning more about reverse mortgage refinancing—or want to find out whether it makes sense for your situation—contact our team today. Our reverse mortgage consultants, like Chris, will take the time to understand your goals and help you make informed decisions about unlocking the power of your home equity.