The HECM Reverse Mortgage Refinance, made possible through the Department of Housing and Urban Development (HUD), comes with many benefits. This reverse mortgage refinance makes it possible to use the equity in your home. It lets you refinance whether you have a conventional home loan, an existing reverse mortgage, or your home is completely paid off.
If refinancing to a reverse mortgage from a conventional mortgage, a reverse mortgage refinance may be able to do away with your monthly payments altogether. Ultimately, a reverse mortgage makes it possible for you to take the equity in your home and use it however you deem best.
The Reverse Mortgage Refinance can:
- Reduce your mortgage rates
- Increase your current income
- Do away with your monthly mortgage payments
With benefits this great, you’re probably wondering: How do I start the process of securing a reverse mortgage refinance? The best place to start is with the lender in your area that has the lowest Total Annual Loan Cost (TALC), although this can be harder than it sounds for those unfamiliar with the finance industry and mortgage rates.
Fortunately, we have a network of mortgage professionals who can help you find the best lenders to get an affordable home that is right for you. To find the ideal reverse mortgage lender and start the application process, talk with a Mortgage Advisor. Fill out our quick 1-minute form to have a Mortgage Advisor contact you.
How Reverse Mortgage Refinance Works
How would you like to turn the equity built up in your home into one lump-sum payment, monthly income, or a line of credit? A HUD HECM Reverse Mortgage does just that. If you have a conventional mortgage, it can often eliminate your monthly payments altogether. For other cash-strapped seniors, it can just make retirement a little more comfortable financially.
This refinance option tends to work best for older adults whose:
- Interest rates have decreased
- Property value has increased, or
- FHA Lending Limit has increased
The HUD HECM Reverse Mortgage is also especially helpful in achieving financial goals for those who are over the age of 62.
Of course, the Reverse Mortgage Refinance is not without its own fees, so you’ll want to shop around MortgageAdvisor.com to find a lender on that will keep these fees and costs low. Some of the fees you’ll want to look out for include:
- Origination fee - pays for the lender’s operating expenses
- Mortgage insurance premium - insures that you’ll get everything promised by the loan
- Appraisal fee - pays for a certified appraiser to determine the current market value of your home
- Service fee set aside - pays for your loan service and is deducted from your loan at the time of closing
Another big difference with the Reverse Mortgage Refinance is that it doesn’t just rely on how much you borrow or your APR. Rather, it depends on how you choose to receive the money, how interest rates change, and the length of the period of time you keep the loan.
The Reverse Mortgage Refinance is also likely different from other loans you’ve encountered in that it does not include just a Good Faith Estimate, Truth in Lending Statement, or Annual Percentage Rate (APR). It includes another set of disclosures referred to as the Total Annual Loan Cost (TALC). Mortgage lenders must provide a TALC to you to allow you to compare their reverse mortgage product to others to find the best deal for you.
TALC on a given reverse mortgage refinance product will be calculated based on three scenarios with three different loan terms:
- The Youngest Borrower’s Life Expectancy
- 1.4 Times The Youngest Borrower’s Life Expectancy
- Two Years
These TALC statement calculations are designed to demonstrate how costs can change over a certain period of time. For those who keep their reverse mortgage refinance for a few years only, upfront costs are greatly increased. In other words, much of the total cost of borrowing with a reverse mortgage finance is out of the borrower’s control.
Finally, in addition to TALC projections, lenders are required to provide borrowers with:
- A clear explanation of the TALC projections
- A comprehensive list of all loan charges, including explanations
- A list of the age of the youngest borrower and the appraised property value
- A document that clearly states that you are not obligated to go through with the reverse mortgage refinance
When it comes to shopping for a reverse mortgage refinance, your success comes down to getting TALCs from several different lenders, comparing them, and choosing the one that best matches your needs and expectations and offers the lowest TALC. With your loan of choice in your sights, it’s time to consider when you want to apply for the loan and how you will accept payments.
To find the ideal reverse mortgage lender and start the application process, talk with a Mortgage Advisor. Call (888) 851-1301 or fill out our quick 1-minute form to have a Mortgage Advisor contact you.