What Are My Options for Refinancing My Reverse Loan?

Keep in mind the following: Government-insured reverse mortgages have a $970,800 maximum home value for 2022. For example, if the value of your house was appraised at $900,000, you would still be able to refinance up to $822,375, even if your house was valued at $900,000. 

There has been a decrease in interest rates. It's possible that you could benefit from a refinance if interest rates have dropped since you first took out a reverse mortgage. The lower the interest rate, the greater the initial payout, and the less interest you (or your heirs) will have to repay when the loan matures, the more favourable the terms. 

National Reverse Mortgage Lenders Association standards state that the increase in the principle amount should be equivalent to or greater than five times the loan's closing fees. As an additional requirement, the new loan proceeds must be at least 5% of the amount being refinanced. You should be left with at least 5% of the amount you refinanced after all of your closing fees have been paid and your initial reverse mortgage has been repaid. The 5-5 rule refers to these two principles for reverse mortgage refinancing. 

Make sure your partner has a sense of security. Another reason to re-finance your reverse mortgage is to include your spouse in the loan, if they were not included in the original application. There are numerous reasons why this could occur. It's possible that your spouse wasn't 62 when you took out your first reverse mortgage. It is possible that you were single at the time of the incident. The reasons for having only one spouse on the loan are not as crucial as the repercussions of doing so. A widow or widower who isn't included on the reverse mortgage loan documentation may be forced to sell the house in order to make good on the loan. The surviving spouse can stay in the house if both names are on the deed. One can continue to receive loan disbursements in the event that one spouse has to go to a nursing home for a period of 12 months or more, but only provided they meet the ongoing requirements of the reverse mortgage, which include property taxes and homeowners insurance. 

Refinancing your reverse mortgage should not be taken lightly. For this reason, many lenders only allow refinances once an initial reverse mortgage has been in place for a specified amount of time (usually 18 months). A reverse mortgage loan may be suitable for you if you meet the criteria listed here. 

You may want to consider a reverse mortgage if your home's value has increased, interest rates have dropped, or you just want to ensure that your spouse can stay in the house if you die or have to move out of the house.