A Quick Look on Reverse Mortgage Loan Refinancing

Are you planning to refinance your reverse mortgage loan? The current interest rates could be lower today. Or maybe the value of your home increased and you can negotiate for a new and better deal.

Few people know that reverse mortgage loans can be refinanced. But you have to bear in mind that it is always important to compare the benefits that you can get against the cost or expenses involved in refinancing. As a rule of thumb, the benefits that you should get from refinancing reverse mortgage should be twice bigger than the costs.

Before applying for reverse mortgage loan refinancing, you may want to consider the following important points first.

You Pay More when You Want Longer Payment Time

If you secured longer payment time, then it could mean lower monthly payments. However, do take note that the amount of interest that you have to pay will also increase considerably. What you need to do is to negotiate for a fixed rate when the existing interest rate in the market is lower. This may result to a better deal for you. But do not forget that the accrued interest will increase the total sum of your loan. A bigger debt therefore could bring unpleasant surprises for your heirs.

Consider Payment Time

As with any a loan, a reverse home loan must be paid back. The pay back time however for a refinanced reverse mortgage could take years. The refinanced reverse mortgage is due for payment when you move to a new residence, if the borrower passes away, or if you sell the home.

The lender will calculate the final amount that you have to pay. The final amount includes the capital, accrued interest, and the loan costs. If the total costs exceed the value of the home, then the lender will collect the difference from the mortgage insurance to fully pay the loan.

Understand the Non-Recourse Nature of Reverse Mortgage

Few borrowers understand what non-recourse loan is. This type of loan simply means that the lender can not use any other asset of the borrower as payment for the cost of reverse home loan. The non-recourse nature of a reverse home loan protects the borrower. It is also the reason why you will not be required to produce credit history or income information. The lender's guarantee is the mortgage insurance. The insurance makes sure that the lender will get his money back.

Differences of Reverse Loans and Home Equity Loans

Both loans use the equity of your home so you can get cash. These loans have similar goals. By using part of the equity, you will be able to draw money by converting the equity to cash. However, home equity loans must be paid back regularly. In contrast, a reverse home loan does not require monthly payments. The payment will become due when the loan is called payable in full, usually because of death, sale of the property, or the borrowing senior no longer using the home as their primary residence.

There are things that you have to bear in mind to make sure that reverse mortgage loan will not become due. First, you have to maintain the property as your primary residence. And like all mortgages, you need to religiously pay the hazard insurance, HOA dues, and the property taxes.