Reverse Mortgage Loan Blog

A government-issued reverse mortgage, or Home Equity Conversion Mortgage (HECM), is a great way to provide a more solid financial future for yourself. Sometimes, though, even better deals can be made possible if you refinance it when economic times become better than they were when you originally closed it. Here are some reasons why you may want to refinance your HECM with a newer HECM.

Lending Limits Increase

One thing that can make refinancing a reverse home mortgage a good deal is if the lending limits in your area have increased. If you have had your reverse mortage for a couple of years or longer, then it is quite possible that the current lending limits could enable you to receive a lot more money than you had before.

About a year ago, the lending limit was raised from $417,000 to $625,500. This meant that whatever your home’s value was, you could not have received more than $417,000 for it. Now that it is raised – but only through January 1, 2010, you may be entitled to much larger amounts if your home has a greater value.

Local areas have limits, too, and this figure could have been changed. You would have to check to see if this has happened, but it is quite possible when the economy improves. When it does get raised, it means that you become eligible for increased amounts in a new HECM.

Interest Rates Get Better

Interest rates are always a concern with any kind of loan – even with a reverse mortgage loan. The higher your interest is, the more that your balance will be eaten away – reducing it even faster. When the interest rates on a reverse mortgage decrease, it enables you to have a cash flow even longer, or possibly even a larger one. A decrease in interest rates may even enable you to pass some (or more) of it on to your heirs.

Home Value Has Risen

In our recent poor economy, many homes lost a lot of value that they had earlier. This was devastating to many people – especially to seniors who saw a lot of their equity disappear. Recent changes in the economy seem to indicate that things are getting better, and, you may be seeing positive changes in your community. The result could easily mean that your home’s value may be going back up. A higher value means that you will be able to receive more money if you refinance your HECM.

More Money Becomes Available

When reverse mortgages are refinanced, it is possible that a lot more money could become available to you. This would mean that your cash flow could increase, you could get more money available for lump sum payments, or your line of credit could also become larger. Any one of these things would certainly be helpful to you.

One very good feature that the government has placed on refinancing your HECM with another one is that there are certain precautions that will be taken to ensure you are getting a better deal than what you already had. A government form will have to be filled out by the reverse mortgage agent, called a “Home Equity Conversion Mortgage Anti-Churning Disclosure.” Its purpose is to actually calculate and record how much of a difference will be gained by the new HECM. The government dictates that you must gain at least three to five times as much as the cost that will be generated from it. There are some exceptions to this rule. If that is not going to happen, you will need to go through counseling for the HECM again.

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