Can I refinance a reverse mortgage with a new reverse mortgage? The answer is sometimes. And it depends upon the current equity in the property.
Home values have risen quite a bit over the last two years, in some communities here in Southern California as much as 20% per year! In a situation like this I have found that some of my prior clients have built up enough equity due to appreciation that they can refinance their existing reverse into a new reverse and tap into a bigger line of credit, higher monthly payouts or even more cash out.
How does it work?
Basically, FHA will not allow a homeowner to refinance their reverse mortgage into a new reverse mortgage unless the benefit to the homeowner is five times greater than the cost of the new reverse. In some cases I have been able to provide my clients with a “free” refinance covering all of their closing costs. I am not always able to do this, but it does happen. Here’s one example.
Mr. and Mrs. H of Pasadena got their first reverse mortgage 2 and half years ago when their home was worth $545,000. This time around it appraised for just over $700,000. Based upon the increase home value they were able to qualify for a growing line of credit $30,000 higher than their existing line of credit AND I was able to do the loan for them at no cost except for the counseling fee of $125.00. Even better, the new reverse mortgage (an adjustable rate loan) had a rate cap of 5% and the old reverse’s cap was a 10%. This means that their interest on the new reverse will never be higher than 7.5% instead of 12.5% cap that was on the prior loan. New reverse mortgage products are now available that might be more suitable and/or beneficial for the homeowner.
If your home has gone up in value and you are interested in finding out if you can refinance your existing reverse mortgage please click on the link beloww, fill out the form here and I will get back to you quickly with an answer either way.
Comments (0)Subscribe to CommentsComment