Reverse mortgages are useful resources for bringing in additional earnings for paying bills, going on adventures and taking part in active adult living during your retirement. You can access the equity in your home to supplement your income, and you don’t have to make monthly mortgage payments. If you have a reverse mortgage, you’ve probably received mailings and phone calls offering refinancing opportunities. You’re promised a higher credit limit, reduced interest rates and more money at your fingertips. Sometimes, refinancing a reverse mortgage can be a great idea.
Why Refinance a Reverse Mortgage?
Refinancing a reverse mortgage can put more cash in your hands. It can also allow you to remove or add a borrower from the mortgage. If you need extra income, you might want to consider refinancing your current reverse mortgage. Refinancing doesn’t always help you out, but it can increase your benefits in some cases.
When to Refinance a Reverse Mortgage
It makes sense to refinance a reverse mortgage under certain conditions. If your home value has risen, you can borrow more cash because you have more equity to offer. If the lending limit has gone up since you took out the loan, you might be able to refinance to get more money. When the homeowner dies, the loan is considered closed. The bank gets its money back through the sale of the property. If the homeowner has a younger spouse, the partner can be added to a reverse mortgage through a refinance when he or she turns 62. This prevents the bank from selling the property when one homeowner passes away. You can also refinance to take advantage of lower interest rates. The rates affect the amount of money that you qualify for. You can typically borrow more when you’re dealing with lower interest rates.
Do You Qualify for a Reverse Mortgage Refinance?
Sometimes, it doesn’t pay to refinance a reverse mortgage. One of the main qualifications involves the amount of cash that you’ll get in relation to closing costs and fees. You must benefit from at least five times more than you’ll pay in fees. For example, if closing costs, taxes and escrow come to $2,000, you should be getting $10,000 or more out of the deal. If you’ll be looking at a lower lump sum, you can still refinance. However, you’ll have to go through counseling to make sure that you understand the program. Refinancing a reverse mortgage doesn’t make sense if you’re planning on moving out in the near future. When you sell, you’ll have to pay back the loan. You’ll end up with less cash in hand from the sale of your property. The bank will also collect if the borrowers have to move to a care facility. If this is in the foreseeable future, you might want to avoid refinancing.
Finally, if the value of your home has gone down, it doesn’t make sense to refinance. Your payments will be reduced, and you won’t have the same benefits as you did before.