Can I Refinance My Reverse Mortgage

Can I Refinance My Reverse Mortgage

Can I refinance my reverse mortgage?  Homeowners that have a reverse loan sometimes find themselves wondering, “can I refinance my reverse mortgage”?  It’s definitely possible to refinance your reverse mortgage.  However, the answer is not a simple “yes” or “no”.

You see, there are rules implemented by FHA in regard to refinancing a reverse mortgage.  Also, there is an industry watch dog by the name of NRMLA that releases advisory opinions that each

Can I Refinance My Reverse Mortgage
Can I Refinance My Reverse Mortgage

lender must follow.  NRMLA (National Reverse Mortgage Lender’s Association) released an advisory opinion rule change in late 2015 that dictates a few specific rules about refinancing a reverse mortgage.

NRMLA’s Reverse Mortgage Refinance Rules:

The basic intent of both FHA and NRMLA’s reverse mortgage refinance rules is to make sure that lenders and brokers are not engaging homeowners in a transaction that does not provide a true benefit.  When you first do a reverse mortgage, one of the pros of reverse mortgage is that it frees up cash flow.  The initial benefit might be that it eliminates your monthly payment.  I might be that it allows you to pay off other debts.  So, when it comes to doing a reverse mortgage refinance, there has to be a solid benefit.

So, here are the rules:

  1. First and foremost, you cannot refinance your reverse mortgage until 18 months have passed.
  2. Secondly, there is a closing cost test. Basically, the amount of money that you receive has to be five times greater than the cost.  So, if the cost is $3000.00., then you have to receive at least $15,000.00.
  3. There is also a loan type test. In plain English, this means that you can’t refinance your reverse mortgage to just change loan types. For example, you can’t go from a variable rate to a fixed rate if there are no other bona fide benefits.
  4. Also, there is a loan proceeds test. In short, you have to receive (in the form of additional cash or credit) at least five percent of what your current balance is.  So, if your balance is $200,000.00, then you need to receive at least $10,000.00 cash or additional credit.

Refinancing Reverse Mortgage – Instances that allow you to refinance your reverse mortgage:

Refinancing Reverse Mortgage
Refinancing Reverse Mortgage
  • The value of your home has gone up considerably since you did your last reverse mortgage.
  • To add a spouse that is not on your current loan. If you were married when you did your last loan, but your spouse was not of age you may want to consider a refinance. It just depends on the timing.  If you did the loan prior to August, 2014 and left your under age spouse off, they are not currently able to live in the home until the day they die.  Doing a refinance to add them to the loan will allow them to live in the home until the day they die.
  • You might be able to benefit by refinancing your reverse mortgage if you did it when the HECM loan limit was lower than it is now (now at $765,600).
  • If you did a fixed rate, lump sum, reverse transaction last time you may not have accessed all the money available to you. Perhaps you didn’t need it all, so you left didn’t take it all.  These instances will be rare, but feasible.

So yes, you can refinance your reverse mortgage.  However, you can only do it IF it provides a meaningful benefit.

It’s also worth noting, the there have been several reverse mortgage changes in 2020.

Want to see if you qualify?

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