Often times, home owners receive tempting credit offers on their existing reverse mortgages. Such lenders promise higher credit limits and better rates. But is refinancing a reverse mortgage a wise move? Well, if the value of your house has improved significantly, refinance can offer an easy route to a higher credit limit. But before you can pen a deal, it’s paramount to understand what reverse mortgage refinancing redefines your future.
Reverse Mortgage Refinancing- An Introduction
A reverse mortgage refinancing is a tool that allows senior citizens, or their dependents, to tap into the additional equity that comes with appreciation in value of their homes or lowered rates.
The Benefits of a Refinance Reverse Mortgage
- Refinancing allows you to add your younger spouse to the title. This mostly applies to individuals who remarry at later stages of their lives. The spouse gets survivorship benefits and also cushions them if the homeowner passes on or is moved to, say, a nursing home.
- An extra credit line. Based on data from Reverse Market Insight , home prices have been appreciating for the last past five years. This, coupled with dropping rates, offers home owners an extra line of credit that can help them meet their daily expenses, meet medical costs and such other expenses while still living in their homes.
- Entry into Jumbo Reverse Mortgage plan. The Jumbo plan allows home owners whose properties clocked $850,000+ in value to have access to proprietary loans. With Jumbo plan, you won’t have to pay monthly mortgage insurance.
Who is Eligible for Reverse Mortgage Refinancing?
Those who meet the “5-times benefit” HUD rule. While you could apply for a reverse mortgage refinancing to get a few bucks for a month’s expenses, HUD stipulates that you are only eligible if you’ll receive amount that is at least five times your closing costs. The only exception is if you are refinancing so as to add a younger spouse to the title.
Those who have an improved margin on their current mortgage. By and large, a reduction in the rates levied translates to improved margins on refinancing your reverse mortgage. It’s generally recommended that you only opt for a refinancing if the rates have dropped by at least 2%.
If you are aged over 62 years. A reverse mortgage is just a fashioned up traditional mortgage that dictates that you must be 62 years or older to qualify for financing. The older you are, the higher the margins that you can get on refinancing your reverse mortgage.
If your spouse is younger, you will have to furnish your loan officer with additional information that they will use to determine your spouse’s eligibility.
Have considerable Equity in the Home. In reverse mortgage refinancing, you are borrowing against your home. Since you can only borrow on what you own, you must have a sizeable equity on the home. Your home’s equity can improve due to appreciation in value or a sizeable accumulation of mortgage payments.
If the home is your principal residence. HUD dictates that you can only qualify for refinancing if you use the home as your primary residence. You can’t seek a mortgage refinance on your rental or commercial properties.
The 5-Step Process to Getting a Reverse Mortgage Refinancing
1. In depth Research
It’s important to get the facts right before you start this process. Doing a background research helps you demystify misconceptions that you may have on reverse mortgages. The information arms you for the steps ahead.
2. Third-party Counseling
If you are satisfied that, indeed, refinance your mortgage will serve your financial needs, the next step is to enlist the services of a HUD-approved counselor. The reverse mortgage counselor will guide you through the requirements to qualifying a refinance and tips to choosing a good lender.
3. Application and processing
You’ll need the counseling certificate and other support documents to complete the application process. You will also have to state whether you’d want to get paid in lump sum, installments or a combination of these.
On receiving your application, the lender will order for an appraisal on your credit and title reports and lien payoffs. The appraisal process helps you determine the current value of your home.
4. Loan Closing
Once the lender approves your loan, they will go ahead to calculate the interest to be levied and closing costs on the loan. You will then be presented with closing documents to sign them off.
5. Funding and Disbursement
Funds are disbursed after 3 days and this loan is applied to existing debts on this property.
Whether you are looking for finances to take care of your medical expenses or improving your retirement life, refinancing your existing reverse mortgage offers a hustle free route to cash in on your home’s equity. We at Rick May understand the many concerns that our clients have as it relates to how the process works. Contact us today for more information on how you can benefit from this great option.