Can You Refinance a Reverse Mortgage?

The short answer is yes. Although a reverse mortgage refinance is like that of a conventional mortgage, there are some distinctions that you and the lender should consider before moving forward with a refinance.

When a reverse mortgage refinance might make sense:

  • Your home value has grown since the time you took out the reverse mortgage
  • You originally obtained your loan when the lending limit was less than the current HECM limit of $726,525
  • You want to add a younger spouse now age 62 to the loan, protecting your spouse from having to sell the home upon your passing
  • To benefit from a lower interest rate or loan margin
  • Your home is worth a lot more than the HECM lending limit of $726,525 and you might qualify for a larger proprietary or jumbo reverse mortgage

Other things to think about are the up-front costs along with the benefits, including the change in your interest rate.

The National Reverse Mortgage Lenders Association (NRMLA) has set forth some ethical standards, called the 5-5 rule, to help lenders determine if refinancing is in the borrower’s best interest.  This rule says:

  • The increase in the principal amount must be equal to or more than five times the loan closing costs.
  • Loan proceeds must be equal to or more than 5% of the amount being refinanced.

Additionally, The HECM refinance must occur after 18 months of the closing of the prior HECM loan that is being refinanced.

Sometimes reverse mortgage needs change and, in some instances, refinancing may be a good option; however, there should be a very clear and defined benefit to justify refinancing. If you are considering refinancing your reverse mortgage, think it over, consider these factors and, if you still want to refinance, give us a call.  We are committed to offering you the best guidance to do what’s right for you and your situation.

Questions? At Longbridge Financial, we’re here to help. To learn more, call (855) 523-4326 or fill out the form to get your free information kit from Longbridge Financial.