REVERSE MORTGAGE
Refinance

A reverse mortgage loan allows homeowners to borrow against their home’s equity, similar to a traditional mortgage, with the home serving as collateral. The most widely used type of reverse mortgage is known as a Home Equity Conversion Mortgage (HECM), which is a unique home loan designed specifically for homeowners aged 62 and older.  Unlike a traditional mortgage, the homeowner doesn’t make monthly payments. Instead, the loan balance grows as interest and fees are added each month, and repayment is only required when the homeowner no longer lives in the home. Throughout the loan period, the title to the home remains in the homeowner’s name. Homeowners must still pay property taxes, maintain homeowners insurance, use the home as their primary residence, and keep it in good condition.

Eligibility
The amount a homeowner can borrow depends on factors like their age, the home’s value, and current interest rates.

Repayment
The loan doesn’t need to be repaid until the homeowner moves, sells the home, or passes away. When the loan becomes due, it is typically repaid by selling the home. If the home’s sale value exceeds the loan amount, any excess goes to the homeowner or their heirs.

Ownership
The homeowner keeps the title to their home, but if they move out or no longer use the home as their primary residence, the loan will need to be repaid.

Loan Amount
The amount you can borrow depends on the value of your home, your age, current interest rates, and the specific reverse mortgage program.

No Monthly Payments
You don’t make monthly payments. Instead, the loan balance grows over time as interest accumulates, and repayment is usually deferred until you move out, sell the home, or pass away.

Interest and Fees
Interest is added to the loan balance each month, so the loan balance grows over time. Typically, fees and closing costs are higher than for traditional loans.

Home Ownership
You remain the homeowner, responsible for property taxes, homeowners insurance, and maintenance.

Benefits
– Provides income for retirees or those on fixed incomes.
– You don’t have to repay the loan as long as you live in the home as your primary residence.
– There’s no risk of owing more than the home’s value when it’s sold, due to a “non-recourse” clause.

Drabacks
– It reduces home equity, meaning you or your heirs will have less value in the home.
– Interest and fees can be high.
– If you fail to pay property taxes, insurance, or maintain the home, the loan could default.

A reverse mortgage refinance can be a helpful option for seniors looking to access additional equity or improve the terms of their existing reverse mortgage. This option is particularly appealing if property values have appreciated or if lower interest rates are available. However, it’s essential for homeowners to consider the long-term impact on their loan balance and estate before proceeding. A reverse mortgage refinance can provide additional cash flow or reduce costs, making it a flexible solution for those aiming to enhance their financial stability in retirement.