Refinancing a Reverse Mortgage

Traditional mortgages can be refinanced to take advantage of lowered interest rates, and likewise, the same can be done with reverse mortgages as well. However, refinancing a reverse mortgage Tulsa can be complicated process and it is important to understand if refinancing is worthwhile to do.

 

Potential benefits of refinancing a reverse mortgage

Lowered Interest Rates – Lowering the rate of interest is one of the main reasons individuals choose to refinance and reverse mortgages are no exception to this. It is important to make sure that the rate of interest is low enough to warrant the costs of a new reverse mortgage.

Home Value Changes – Over time, the value of a home may change. Reverse mortgage loans can be maintained for many years and the value of a home may have increased significantly since the initial reverse mortgage deal was made. The amount of money that a borrower can access is directly dependent on factors such as the borrower’s age, and the value of the home, this can lead to a much greater lump sum, monthly payments, or a line of credit

Adding another individual to the loan – So long as the individual meets the requirements of a reverse mortgage as well, a potential reason to refinance is to add another individual to a reverse mortgage so that they may access funds or inherit the home in the case of the original borrower’s passing.

Option to change how you receive payment – Upon refinancing, you may decide to receive payment in a different manner. The options for payment are lump sum one time payments, monthly payments for a limited period of time, or until the borrower passes away, A credit line, or a mixture of all three, providing potentially much needed flexibility.

 

Reverse mortgage refinancing requirements

Refinancing a reverse mortgage Tulsa follows a similar process to obtaining a reverse mortgage. In fact, it is obtaining a new reverse mortgage that pays for the original one. This includes paying the initial costs of closing a mortgage once more. However, there are specific requirements that must be met when attempting to refinance a reverse mortgage with another reverse mortgage.

  • New regulations and guidelines of reverse mortgages must be met, which may be different from current regulations and guidelines.
  • The original reverse mortgage must be at least 18 months old
  • For multiple reverse mortgage refinances, there must be at least 12 months apart from a previous reverse mortgage refinance
  • The finances gained from refinancing must be at least five times greater than the costs to close the loan. This is a regulation put into place known as the “five times benefit rule” which serves to protect borrowers. If this number is not met, the loan is likely to not be granted. Exceptions are only made if there is a major benefit to the borrowing party.
    • One exception is if the borrower wishes to add a spouse to their reverse mortgage. This allows for the spouse to access the line of credit for the reverse mortgage or allows the spouse to stay in the home if the original borrower passes away.
    • Another exception is if the rate of accrual is lessened significantly which could potentially save borrowers thousands.

These requirements were designed in order to ensure that the borrower benefits from refinancing their home, ensuring that the decision is well informed preventing a borrower from losing value on their home.

 

Refinancing with alternative options

So long as the option you choose refinancing a reverse mortgage Tulsa your home is enough to pay off the existing debt of the reverse mortgage, there are several alternative ways to refinance your home.

  • Traditional Mortgage
    • Monthly payments.
    • Lower closing costs compared to a reverse mortgage.
    • Interest rate related to your credit score and debt to income ratio.
    • Income will play a factor in approval for a loan.
  • Home Equity Line of Credit (HELOC)
    • Typically, even lower interest rates than other methods of refinancing.
    • Flexibility with funds. HELOCs allow an individual to access funds when they need them. Only funds that are borrowed intentionally are required to be paid back with some interest.
    • High loan limit.
    • Potential tax deductions on funds used for home improvement.
    • Potential boost to credit score.
  • Sale-Leaseback
    • Monthly payments as a renter.
    • Renovations and repairs handled by the company that you sell your home to.
    • Removal of housing debt.
    • Home equity can be leveraged almost entirely.