Is It Time to Refinance?

If you don’t already know, you can refinance a reverse mortgage to take advantage of lower interest rates, and higher real estate values. You can also refinance to add a spouse to the reverse mortgage. Interest rates are at historic lows, and real estate values have increased over the past few years. Now could be an excellent time to reassess an existing reverse mortgage to determine whether additional financial benefits can be gained by refinancing. The goal of refinancing is to replace a current reverse mortgage with better terms for the homeowner.

 

There are several important factors to consider in deciding whether or not to refinance an existing reverse mortgage.

 

Comparison of interest rates

If the interest rate on the refinancing is less than the interest rate on the existing reverse mortgage, refinancing can benefit the borrower in two ways. Firstly, a lower interest rate results in less interest being added to the mortgage balance each month. Secondly, a lower interest rate can potentially increase the proceeds on the new loan.

 

Switching from an adjustable-rate to a fixed rate

Given the dip in interest rates, it may be a good time to switch from a credit line with an adjustable-rate to a fixed-rate mortgage to lock in a low rate for the life of the new mortgage.

 

Comparison of margin

Margin is a rate the lending bank adds on top of the current index rate on adjustable-rate loans. If the margin rate is less than the margin rate on the existing reverse mortgage, this may also benefit the borrower in the same way as discussed above.

 

Value of residence

Some areas of the country continue to experience high home valuations despite the coronavirus. Refinancing a reverse mortgage can tap into the higher valuations and increase the amount of money available to the homeowner.

 

Cost of refinancing

The standard costs of refinancing apply. However, the FHA’s Mortgage Insurance Premium paid for at the time of the original reverse mortgage (typically a significant amount) could be credited toward the refinance.

 

There are certain technical requirements that a homeowner needs to satisfy to refinance a reverse mortgage. A qualified representative from a lending institution, such as Finance of America Reverse (FAR) LLC, can help with the technical requirements and assist with ascertaining whether refinancing is beneficial.

 

– Joe from Arizona, a FAR customer who is finding purpose in this new stage of his life.

 

* The opinions expressed in this article are those of the authors. They do not necessarily reflect the opinions or views of the Finance of America Reverse (FAR) LLC

 

 

This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.