Section 6: Reverse Mortgage Loan Refinancing
REVERSE MORTGAGE Loan Refinancing
The process is similar to a traditional refinance in that it replaces the existing mortgage with a new loan. Also, like traditional loans, borrowers must meet eligibility requirements to refinance a reverse mortgage. The Reverse mortgage Home Loan program provides qualified homeowners with a simple way to use their equity to be paid monthly instead of paying monthly. Now the current economic climate makes a great time or many homeowners to take advantage of the numerous benefits found in a reverse mortgage refinance.
To get started, call, or start your reverse mortgage refinance quote online.
When Should you Refinance a reverse mortgage Loan?
In general, you should refinance a reverse mortgage loan if:
Your Home’s Value Has Gone Up
If you have built equity in your home either by the housing prices rising or paying down your loan it might be a good time to refinance. If you need to lower your interest rate, need cash to pay off debts, or do an additional project on your home then a refinance might be the best option for you.
10 steps to Refinance Your reverse mortgage Loan
Most borrowers follow the following reverse mortgage refinance steps:
1. Determine if you still need a reverse mortgage loan.
The criteria for reverse mortgage loans changes each year FHFA sets the conforming loan limits. If your existing loan balance exceeds these limits, a reverse mortgage refinance loan may be your only option.
2. Check your credit scores.
Many reverse mortgage lenders set the minimum bar at 700 for a reverse mortgage loan. That’s 80 points higher than the reverse mortgage minimum, so make sure you check your credit score before you apply for a reverse mortgagerefinance.
3. Make sure your debt-to-income (DTI) ratios are in line.
reverse mortgage lenders measure your DTI ratio by dividing your total debt by your gross income, and 45% is the standard maximum. That’s significantly lower than the 50% ratio conforming lenders allow.
4. Shop for the best reverse mortgage refinance rates.
Some lenders specialize in reverse mortgage loans. Banks may even offer lower rates if you carry large deposit balances with them. Compare loan estimates with at least three to five lenders to make sure you’re getting the best deal.
5. Ask the lender when you can lock in your rate.
reverse mortgage lenders may require a loan approval before locking in your rate. reverse mortgage rates change daily, so make sure you know your lender’s lock policy to avoid any surprises in the terms of your rate later in the process.
6. Provide your paperwork promptly.
Because reverse mortgage lenders don’t allow automated approvals, you’ll have to provide more financial paperwork. reverse mortgage loans typically take longer to close than standard loans, because a human underwriter is involved in the decision making and is responsible for ensuring the loan meets reverse mortgage investor standards.
7. Keep your cash liquid.
It’s not uncommon for a reverse mortgage lender to require proof of six to 24 months’ worth of mortgage payment reserves in a liquid account, meaning it can be easily converted to cash.
8. Plan for a pricey appraisal.
If you’ve got a custom home or a lot of square footage, appraisers may charge more to find comparable homes, and for the extra legwork it will take to measure out and list all the amenities in your home.
9. Notify your escrow officer and loan officer of any trusts in advance.
Lenders want to make sure they can collect on a reverse mortgage loan if you default, and they may require extra steps to approve any trust your property is held in. Escrow officers may also need a copy of the trust to properly prepare your closing documents.
10. Review your closing disclosure and close.
Like any refinance, you’ll receive a closing disclosure three business days before your closing. Review the paperwork and make sure the numbers are what you expected. If everything looks correct, your loan documents will be returned to the lender, your old reverse mortgage loan balance will be paid off with the funds from your new reverse mortgage loan.
reverse mortgage Refinance Requirements
. At least 20% equity in your home
. A minimum 700 credit score
. Total debt that doesn’t exceed 45% of your income
. No major credit problems in your recent past, such as bankruptcies or foreclosures
. Full documentation of all sources of income including tax returns, paystubs, CPA letters and IRS validation of all filed tax forms
* Requirements may very program to program and lender to lender
How to Get the Best reverse mortgage Refinance Rates
reverse mortgage lenders typically set interest rates based on their own standards. Shopping for the best reverse mortgage refinance rates could save you thousands or even hundreds of thousands of dollars over the life of the loan.
You’ll typically snag the best reverse mortgage mortgage refinance rates if you:
Have a high credit score.
Although 700 is the minimum, reverse mortgage lenders may reward higher-credit-score borrowers with lower rates and closing costs.
Don’t borrow the maximum.
reverse mortgage lenders may offer a lower rate if you’ve built up substantial equity and just want to refinance to save on your monthly payment (and not tap equity).
Avoid niche REVERSE MORTGAGE loan programs.
Some reverse mortgage lenders offer special programs to make reverse mortgage refinance qualification easier, such as using bank statements instead of tax returns to prove income. These flexibilities usually require you to pay a premium in the form of a higher interest rate.
Two Great reverse mortgage Loan Refinancing Options
Traditional reverse mortgage Refinance
A reverse mortgage refinance is simple loan backed by the U.S. Department of Agriculture used to refinance or replace an existing mortgage. Like reverse mortgage loans, a reverse mortgage refinance offers fantastic rates, lower costs, and greater flexibility than other programs.
Thinking about refinancing? Speak with an Orbit Home Loan specialist to discuss your options.
Reverse Mortgage Refinance Eligibility
In general, a reverse mortgage is a great way to access your home's equity to supplement your income, establish a "rainy day fund" or meet a variety of other financial goals. And with its flexible repayment option, it offers homeowners greater control over their finances. As with any home-secured loan (or mortgage), you must meet your loan obligations, keep current with property taxes, insurance, maintenance, and any homeowner’s association fees. But how do you know if you are eligible for a reverse mortgage? Though, like many, you may be asking yourself, am I eligible for a reverse mortgage, is my property a reverse mortgage eligible property, or can I get a home equity loan with bad credit?
If you are interested in tapping into your home equity to get funds or an extra source of cash you can use today or to have a safety net for the future, the following requirements must be met:
- All borrowers on the home’s title must be at least 62 years old. The older you are, the more funds you can receive from a Home Equity Conversion Mortgage (HECM) reverse mortgage.
- You must live in your home as your primary residence for the life of the reverse mortgage. Vacation homes or rental properties are not eligible.
- You must own your home outright or have at least 50% equity in your home to be eligible for a reverse mortgage loan. Even if you owe some money on your existing mortgage, you may be eligible for a reverse mortgage. The funds from the reverse mortgage would first pay off your mortgage and satisfy any other eligible existing liens before you could use the funds for other things. Refinancing existing debt(s) with a reverse mortgage can help improve monthly cash flow.
- You must meet with a Department of Housing and Urban Development (HUD)-approved reverse mortgage counselor prior to applying for a reverse mortgage loan. The reverse mortgage counselor will discuss how a reverse mortgage works and the associated costs. The goal of the counseling session is to make sure that potential borrowers fully understand and are comfortable with the process and the loan terms.
*Don’t meet the minimum requirements? You still may be eligible: talk with an Orbit Home Loan specialist today. (CLICK)
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