If you've already been approved for Reverse Mortgage loans, you should have no trouble meeting the requirements for a Refinancing Reverse Mortgage loan.
- You must be 62 years old or older.
- You should primarily reside at home.
- It's important to have a substantial amount of equity in your property.
Prove that you are able to keep up with the loan's recurring costs by submitting proof that you are currently making payments on things like homeowners insurance, property taxes, and (if applicable) homeowners association dues.
Arguments in Favor of Refinancing
Though, being able to refinance is no guarantee that you should. For refinancing to make sense, it must provide some sort of tangible benefit. The first two are financial, while the last one is for your mental well-being. Nevertheless, there are three situations in which it makes sense to pursue a refinancing.
The value of your home has gone up. One of the main factors in determining your loan amount, along with your age and the going interest rate, is the value of the property you intend to borrow money against (principal limit). If your home's value has improved, you may be able to take more money from a reverse mortgage loan by refinancing into a new loan and taking out a larger amount.
Things to think about In 2022, the maximum home value for a reverse mortgage with federal backing is $970,800. Even if your home's appraised value was more than $822,375 (for example, $900,000), the maximum loan amount for your refinance would not exceed $822,375.
The interest rate on loans has gone down. If rates have gone down since you first got your reverse mortgage, you could apply to have it refinanced. The less interest you (or your heirs) have to pay off when the loan comes due, the lower the rate of interest accrual, which can lead to a larger initial payoff.
You need to discover if your financial situation would dramatically improve with the amount you're considering refinancing into. According to regulations set forth by the National Reverse Mortgage Lenders Association, the increase in principal must be equal to or greater than five times the loan's closing costs. The amount that can be refinanced plus the amount of the new loan must be greater than or equal to 5%. That is to say, once you pay off the reverse mortgage and any associated fees, you should have at least 5% of the original amount available to you. These two stipulations are known as the “5-5 rule” and are necessary for getting a reverse mortgage refinanced.
Make your lover feel safe and secure. Refinancing could be a good option if your spouse was left out of the original reverse mortgage but you now want to include them in the loan. There could be a number of causes for that. Perhaps when you first applied for a reverse mortgage, your spouse wasn't yet 62. Perhaps you were currently unattached. The reasons why are less important than the results of merely having one spouse cosign for the loan. If the widow or widower isn't named on the reverse mortgage loan paperwork, the debt may have to be repaid in full, which could force the sale of the home. If both partners are on the title, the surviving partner can continue living there. Similarly, if one spouse needed to enter a nursing home (and therefore leave the home for a period of 12 months or more), the surviving spouse could remain in the home and continue to collect loan payments so long as they met the reverse mortgage's ongoing requirements, such as maintaining the home and paying taxes and insurance on it.
Avoid making a hasty decision when refinancing a reverse mortgage. However, many financial institutions enforce a “seasoning” requirement that limits eligibility for refinancing to borrowers who have held their first reverse mortgage for a minimum period of time (usually 18 months). If you want to know if a reverse mortgage loan is right for you, click here.
You should consider a reverse mortgage refinance if the value of your property has improved dramatically, interest rates have dropped, or you just want to make sure your spouse can stay in the home if something happens to you.
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