A wise move, under the right circumstances
Access your funds, which may be disbursed within three days after closing.
“Your loan funds will first be used to pay off any existing mortgage on your home, and a new lien will be placed on your home with the reverse mortgage. You can then use the remaining funds from your reverse mortgage any way you choose,” DeMarkey said. How and when you receive funds will depend on whether you elect to receive the loan proceeds as a lump sum, line of credit, or monthly cash advances.
Reverse mortgage refinance costs
The costs to refinance a reverse mortgage are similar to what you would pay for a new reverse mortgage or traditional mortgage.
You’ll owe closing costs that may include a lender origination fee, as well as third-party fees for the appraisal, credit check, surveys (if required), and recording fees.
HUD caps the amount a lender can charge in origination fees at $6,000. They may charge $2,500 or 2% of your home’s value up to $200,000 plus 1% of its value above that, whichever is greater. But the origination fee cannot be more than $6,000.
Your closing costs can be paid in one lump sum at closing or rolled into your loan balance if you choose.
The FHA mortgage insurance premiums for a HECM include an upfront fee of 2% of the loan amount, and an annual fee of 0.5% of the loan balance.
Lenders can also charge monthly servicing fees of up to $30 for fixed-rate reverse mortgages and $35 for adjustable-rate mortgages (ARMs).
Yes, you can refinance an existing reverse mortgage. However, you cannot refinance until you’ve had your current reverse mortgage for at least 18 months, and there must be a clear financial benefit to refinancing the loan.
You can refinance a reverse mortgage 18 months after you opened your current reverse mortgage if your home’s appraised value has increased significantly, you could qualify for a better interest rate, or to add your spouse to the loan once they turn 62.
Yes, you can get out of a reverse mortgage by paying off your balance owed – typically done by either refinancing the property or selling it. Joe DeMarkey with the National Reverse Mortgage Lenders Association says borrowers can pay off a reverse mortgage at any time without penalty.
“A refinance can pay off your existing reverse mortgage and possibly provide you with a lump sum or monthly payment tapped from available additional equity – money that can come in handy as you age,” Fleysher said.
However, be sure to inspect your reverse mortgage loan documents to learn if there are any fees related to prepayment, “and check with your refinancing lender or agent regarding closing costs involved,” he recommended.
Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency. Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUD-approved agency. Youngest borrower must be at least 62 years old. Your monthly reverse mortgage advances s. At the conclusion of the term of the reverse mortgage loan contract, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to you, and you may need to sell or transfer the property to repay the proceeds of the reverse mortgage with interest from your assets. We will charge an origination fee, a mortgage insurance premium, closing costs or servicing fees for the reverse mortgage, all or any of which we will add to the balance of the reverse mortgage loan. The balance of the reverse mortgage loan grows over time, and interest will be charged on the outstanding loan balance. You retain title to the property that is the subject of the reverse mortgage until you sell or transfer the property, and you are therefore responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts may cause the reverse mortgage loan to become due immediately and may subject the property to a tax lien or other encumbrance or to possible foreclosure. Interest on reverse mortgage is not deductible to your income tax return until you repay all or part of the reverse mortgage loan. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.
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