Refinancing A Reverse Mortgage - Is It Right For You?

From the ReverseMortgageCity.com Media Center

Many homeowners who have had their Reverse Mortgage for a while have been asking if it is possible to refinance a Reverse Mortgage and if it woud make sense to do so. The answers are yes, it is definately possible, and maybe, it might make sense depending on your situation. Lets look at a few situations to see when refinancing your Reverse Mortgage might make sense.

As you probably know, the amount of money you qualify for with a Reverse Mortgage is largely based on the equity you have in your home and your age. So if you took at a Reverse Mortgage in the year 2000 for example, and since then your home has appreciated considerably you stand to have more equity available in addition to being 8 years older. Lets look at a more specific example. Lets say you took out a Reverse Mortgage in 2000 for $50,000 and your home was worth $250,000 and you were 72 years old at the time. Fast forward to today and your home is worth $450,000 and you owe $75,000 on your reverse mortgage. Can you refinance and does it make sense?

Every year HUD adjusts the county lending limits to keep pace with increases in home values, so it's possible that not only has your home increased in value but the amount of money available has gone up as HUD changes the lending limits. In 2000 you may have only qualified for a loan of about $125,000 but today, due to the increase in your homes value, the increase in the HUD limits, and those 8 more years of happy living, you might qualify for closer to $250,000. So in this case, if you needed access to some more equity to cover bills, or health costs, you could actually refinance to use more of your equity. One thing to also notice is that in 2000 you had $200,000 in equity but in 2008, even after pulling the full $250,000 out you would still have the same amount of equity left in the home as you did in 2000. This may not always be the case and more than likely homes won't appreciate quite as fast as they have in the past. Reverse Mortgages base the amount they will lend to you on the assumption that your home will go up in value every year, so if your home goes up faster than they are assuming you won't actually go through your equity like you think.

Of course every situation is unique and it doesn't always make sense to refinance a Reverse Mortgage. If you are only planning on staying in the home for a short period of time or if you do not need the extra cash, or if you are concerned about using to much of the equity in the home then refinancing may not be the right thing for you at this time. Remember, it's important to work with someone who is going to take the time to go over all your options with you and find out what makes the most sense for you, and should you have any questions make sure to ask as many as you can. Refinancing a Reverse Mortgage can provide you with a lot of extra benefits but it should only be done if you really understand the reasons for doing so.