Reverse Mortgage Refinance: Turn Your Home Equity Into Financial Flexibility
Replace your existing mortgage with a reverse mortgage, eliminate required monthly mortgage payments, and access a portion of your available home equity.
If you're 62 or older and have built substantial equity in your home, a reverse mortgage refinance may give you a way to put that equity to work without selling your home.
A reverse mortgage can be used to pay off your existing mortgage, potentially eliminate your required monthly mortgage payment, and provide access to additional available equity.
Depending on the loan and your eligibility, proceeds may be available as a lump sum, monthly advances, a line of credit, or a combination of available options.
You continue to own your home and retain title.
How Does a Reverse Mortgage Refinance Work?
A traditional mortgage requires you to make monthly principal and interest payments to the lender.
A reverse mortgage works differently.
When you refinance with a reverse mortgage, proceeds from the new loan are first used to pay off your existing mortgage and other required liens or obligations.
If sufficient proceeds remain after satisfying those obligations and applicable closing costs, the remaining funds may be available to you based on the loan program and payment option selected.
You may be able to:
- Pay off your existing mortgage
- Eliminate required monthly principal and interest mortgage payments*
- Access a portion of your home's available equity
- Remain in your home
- Retain ownership and title
- Create additional financial flexibility during retirement
How Can You Receive Your Reverse Mortgage Funds?
Depending on the reverse mortgage program you select and your eligibility, available proceeds may be structured in several ways.
Lump Sum
Receive eligible available proceeds as a lump-sum distribution, subject to applicable program limitations. This may be useful for homeowners who have a specific financial need or major expense.
Monthly Advances
You may be able to structure your available proceeds as monthly advances to supplement other sources of retirement income.
Line of Credit
Eligible borrowers may choose a reverse mortgage line of credit, providing access to available funds when needed. With certain reverse mortgage programs, unused available credit may grow over time according to the terms of the loan.
Combination
Depending on the program, you may be able to combine available payment options to create a structure that fits your financial needs.
Your MyLoanDesk mortgage specialist can explain which options are currently available based on your loan program.
Why Do Homeowners Refinance Into a Reverse Mortgage?
There isn't one reason that fits every homeowner. Some borrowers want to eliminate an existing mortgage payment. Others want access to additional liquidity or simply want more flexibility during retirement.
Common reasons include:
What Happens to My Current Mortgage?
Your existing mortgage generally must be paid off as part of the reverse mortgage transaction. Reverse mortgage proceeds are first applied toward paying off the existing mortgage and other required liens.
Example
Suppose your home is worth $700,000 and you still owe $150,000 on your current mortgage.
If you qualify for sufficient reverse mortgage proceeds, a portion would first be used to pay off that $150,000 mortgage.
Any additional proceeds available after paying required liens, costs, and other obligations may then be available to you according to the terms of your reverse mortgage.
The actual amount available depends on your age, home value, current mortgage balance, interest rates, program limits, property eligibility, and other factors.
Do I Still Own My Home?
Yes.
One of the most common misconceptions about reverse mortgages is that the lender takes ownership of your home.
You continue to own your home and retain title.
Like any mortgage, the lender has a lien against the property.
You remain responsible for meeting the terms of the reverse mortgage, including paying property taxes, homeowners insurance, applicable HOA charges, and maintaining the property.
Reverse Mortgage Refinance vs. Traditional Refinance
| Feature | Reverse Mortgage Refinance | Traditional Mortgage Refinance |
|---|---|---|
| Required monthly principal & interest payment | No* | Yes |
| Minimum age | Generally 62+ for HECM | No reverse-mortgage age requirement |
| Existing mortgage | Paid off through new loan | Paid off through new loan |
| Access home equity | Potentially | Potentially |
| Monthly advances available | Depending on program | No |
| Line-of-credit option | Depending on program | Not typically |
| Remain owner of home | Yes | Yes |
| Loan balance | Generally increases as interest/ charges accrue | Generally decreases as payments are made |
| Repayment | Generally upon a maturity event | Monthly over loan term |
A reverse mortgage isn't automatically better than a traditional refinance. The right option depends on your goals, available equity, current mortgage, age, finances, and how long you expect to remain in your home.
Reverse Mortgage Refinance vs. HomeSafe Second®
Already have a first mortgage with a low interest rate that you don't want to replace?
You may have another option.
HomeSafe Second® is a second-lien reverse mortgage designed for eligible homeowners that may allow you to access equity without refinancing your existing first mortgage.
Reverse Mortgage Refinance
Your existing first mortgage is paid off and replaced by the reverse mortgage.
HomeSafe Second®
Your existing first mortgage remains in place, and the reverse mortgage is placed behind it as a second lien.
Which approach makes more sense depends on your existing mortgage rate and balance, available equity, age, financial goals, and program eligibility.
Compare HomeSafe Second®How Much Money Can I Receive From a Reverse Mortgage?
There isn't one percentage or dollar amount that applies to every homeowner.
The amount you may qualify for depends on factors including:
- Age of the youngest eligible borrower
- Home value
- Current interest rates
- Existing mortgage balance
- Reverse mortgage program
- Property type
- Property eligibility
- Applicable lending limits
- Financial assessment
- Other program requirements
Generally, greater home equity and an older borrower age may increase the amount of proceeds available, but individual results vary.
What Types of Reverse Mortgages Are Available?
FHA-Insured HECM
The Home Equity Conversion Mortgage (HECM) is the federally insured reverse mortgage program.
HECMs are generally available to eligible homeowners age 62 and older and are subject to FHA requirements.
Proprietary Reverse Mortgages
Private or proprietary reverse mortgages may provide additional options for homeowners, particularly those with higher-value properties.
Certain proprietary programs may have different age, loan amount, property, and eligibility requirements.
MyLoanDesk can help you compare available reverse mortgage programs based on your particular situation.
Who May Qualify for a Reverse Mortgage Refinance?
Eligibility depends on the specific reverse mortgage program.
For an FHA-insured HECM, borrowers generally must:
- Be at least 62 years old
- Use the property as their principal residence
- Have sufficient home equity
- Meet applicable financial assessment requirements
- Remain current on property-related obligations
- Complete required reverse mortgage counseling
- Meet FHA property and program requirements
Proprietary reverse mortgage requirements may differ.
What Costs Are Involved?
Reverse mortgages have closing costs, just like traditional mortgages.
Depending on the program, costs may include:
- Origination charges
- Appraisal fees
- Title and settlement charges
- Credit and verification fees
- Recording charges
- Mortgage insurance premiums for applicable FHA HECM loans
- Other permitted third-party closing costs
Some costs may be financed into the reverse mortgage rather than paid entirely out of pocket, subject to loan terms and available proceeds.
Your Loan Estimate and closing documents will provide the actual costs associated with your loan.
Frequently Asked Questions About Reverse Mortgage Refinancing
Can I refinance my current mortgage into a reverse mortgage?
Yes, if you meet the applicable eligibility requirements and have sufficient reverse mortgage proceeds to satisfy your existing mortgage and other required obligations.
Will a reverse mortgage eliminate my mortgage payment?
A reverse mortgage can pay off your existing mortgage and does not require monthly principal and interest payments on the new reverse mortgage.* You must continue paying property taxes, homeowners insurance, applicable HOA charges, and other required property expenses and comply with the loan terms.
Do I have to own my home free and clear?
No. You can have an existing mortgage. However, your existing mortgage generally must be paid off at closing using reverse mortgage proceeds and/or other funds if necessary.
Do I lose ownership of my home?
No. You retain title and continue to own your home. The reverse mortgage creates a lien against the property, similar to other mortgage loans.
Can I sell my home after getting a reverse mortgage?
Yes. You can sell your home. The reverse mortgage balance is generally repaid from the sale proceeds, and remaining equity belongs to you after satisfying the loan and applicable transaction costs.
Can my heirs keep the home?
Generally, yes. After a maturity event, heirs may have options to repay the reverse mortgage and retain the property, subject to applicable loan terms and program requirements. They may also choose to sell the property and use the proceeds to satisfy the reverse mortgage.
Will I ever owe more than my home is worth?
Reverse mortgages generally include non-recourse protections, subject to applicable program and loan terms. For an FHA-insured HECM, the mortgage insurance provides specific non-recourse protections. Your loan specialist can explain how these provisions apply to your particular reverse mortgage.
Is reverse mortgage money taxable?
Reverse mortgage proceeds are generally considered loan proceeds rather than earned income. However, individual tax circumstances differ. You should consult a qualified tax professional regarding your specific situation rather than relying on mortgage information as tax advice.
Does the reverse mortgage balance increase?
Generally, yes. Because monthly principal and interest payments are not required, * interest, mortgage insurance when applicable, and other financed charges may accrue and increase the loan balance over time. As the balance increases, your remaining home equity may decrease.
When does a reverse mortgage become due?
A reverse mortgage generally becomes due and payable after a maturity event defined by the loan documents, such as when the last applicable borrower permanently leaves the home, sells the property, or fails to meet certain loan obligations. Specific requirements depend on the reverse mortgage program and loan terms.
Should You Refinance Into a Reverse Mortgage?
A reverse mortgage can be a powerful financial tool, but it isn't right for everyone. Before deciding, consider questions such as:
- How long do you plan to remain in the home?
- How much do you owe on your existing mortgage?
- How much equity have you accumulated?
- How important is eliminating your monthly mortgage payment?
- Do you need cash now or access to funds later?
- Would keeping your existing first mortgage make more sense?
- How will the loan affect the equity remaining for you or your heirs?
At MyLoanDesk, the goal is to help you compare your options before choosing a loan.
That may include a traditional reverse mortgage refinance, HomeSafe Second®, HELOC, home equity loan, or another available mortgage solution.
See What Your Home Equity Could Do for You
If you're 62 or older and have significant equity in your home, you may have more options than you realize. MyLoanDesk can help you determine:
- • How much you may qualify for.
- • Whether your existing mortgage can be paid off.
- • How much equity may remain available to you.
- • Which reverse mortgage programs may fit your situation.
- • Whether refinancing or keeping your existing mortgage makes more sense.
No obligation. Review your available options before deciding.
Important Disclosures
*A reverse mortgage does not require monthly principal and interest mortgage payments while applicable loan requirements are met. It is not a payment-free loan.
Borrowers remain responsible for property taxes, homeowners insurance, applicable HOA charges, property maintenance, and compliance with all loan terms. Failure to meet these obligations may cause the loan to become due and payable.
Interest and applicable fees accrue to the reverse mortgage balance over time, which generally increases the amount owed and reduces remaining home equity.
HECM borrowers must meet applicable FHA requirements and complete HUD-approved reverse mortgage counseling before closing.
Reverse mortgage programs, interest rates, available proceeds, costs, property requirements, age requirements, and eligibility are subject to change. Not all borrowers or properties will qualify.
MyLoanDesk does not provide tax, legal, or financial-planning advice. Borrowers should consult appropriate professionals regarding their individual circumstances.