Reverse Info: HECM to HECM Refinance aka HECM Reset
With HECM Reverse Mortgages there is an old misconception that once you do a Reverse Mortgage you’re stuck with the loan for life. Fortunately this is wrong. A Reverse Mortgage is the same as any mortgage in that you can sell the home, Pay off the Mortgage or refinance it.
Refinancing a Reverse Mortgage is called a HECM to HECM Refinance. I like to call this process the HECM Reset. The primary benefits of refinancing your Reverse Mortgage include:
- Adding a Spouse to the loan
- Take additional money from the equity in the home
- Lower Interest and Mortgage Insurance Rates
Let’s look at these options a little closer.
Adding a Spouse to the loan
I’ve had a number of clients do a Reverse Mortgage Reset to add a spouse. This usually happens when the current homeowner marries after setting up their Reverse Mortgage and wants to protect their spouse financially if they were to pass away first.
Another reason adding a spouse with a HECM Reset is helpful is that up until recently a spouse that was not 62 or older was not protected by the Reverse Mortgage. This put them in a very precarious situation further down the road if the older spouse who did the Reverse Mortgage passed away first. By doing a HECM to HECM Refinance both homeowners are protected by the Reverse Mortgage.
Take Cash Out
Property Appreciation rates in Utah, Nevada, and Colorado are soaring and have reached double digits in some cities. When homes appreciate like this, a Reverse Mortgage can be refinanced and set to the current appraised value. The higher value allows the homeowner to cash out additional funds for personal use.
Interest Rates and Mortgage Insurance Rates on Reverse Mortgages are generally lower now than they have been in recent years. By doing a Reverse Mortgage Refinance you may be able to lock in a lower rate to protect more of your home’ equity. For example on a $200,000 mortgage a .5% reduction in rate saves nearly $50,000 in interest charges over a 20 year period.
Who is eligible for the HECM Reset
If you have a Reverse Mortgage it doesn’t hurt to talk with a Loan Officer to see if you’d qualify. But because of changes to the lending limits it is usually harder to qualify if your Reverse Mortgage was originated prior to October 2017. I have however, seen a lot of people qualify if they originated their Reverse Mortgage between 2010 and 2013 as the real estate market was bottoming out.
Work with a professional
The HECM to HECM Refinance is a loan that the average Loan Officer isn’t familiar with. Be sure to talk with a Reverse Mortgage Specialist to make sure you will qualify to Refinance your Reverse Mortgage. You don’t want to be charged for the cost of an appraisal unless you know you qualify.
If you or someone you love would like to look at your options to maximize the benefits of your Reverse Mortgage call me today.
President – Reverse Mortgage Specialist
Heritage Reverse Mortgage
Heritage NMLS #1497455 Trevor’s NMLS #: 267962
1060 South Main Street Bldg. A Suite 101B
St George Utah 84770