Reverse Mortgage Refinancing
While many seniors are fully conversant with a reverse mortgage, many are surprisingly ignorant that they can refinance a reverse mortgage. Just like a normal home equity loan, reverse mortgage refinancing can be a good option for some.
If you already have a reverse mortgage and looking to refinance, you should think about your options and whether raising money through some other means would be more appropriate. The set up and closing costs of this type of mortgage are more expensive than other types of loan and you could find that after paying off these charges, the equity left in your home is substantially reduced.
Am I eligible for refinancing my existing reverse mortgage?
Chances are, if you qualified for this type of mortgage in the first place, you will also qualify for refinancing. There are 4 factors that will ultimately decide on how much more you can borrow: your age, the size of your existing loan, interest rates and how much more equity you have in your home. If you took out the mortgage several years ago it's more than likely that the value of your home has increased so there'll be more equity to borrow against.
Even if you took out the maximum amount allowed with your HECM mortgage, you may find you can borrow more. This is because the Department of Housing and Urban Development reviews the maximum lending limits each year. Each year the maximum amount that can be borrowed has been raised. So, if you took out your loan several years ago and it was the maximum amount allowable, chances are you can go back and borrow more.
When looking at the costs of refinancing, a good general rule of thumb is that you should be borrowing somewhere between 2 and 4 times the amount of the closing costs and other charges. Anything less than this may not be in your best interests.
For many cases, counselling isn't mandatory for refinancing, however it is a very good idea to seek advice from a third party. They may be able to advise you of other alternatives. Also, you should talk to your heirs. It's important that they also feel comfortable with your decision about refinancing your current reverse mortgage.
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