Honolulu Mortgage Stars

Some seniors want to refinance their reverse mortgage loans. This option is good if the interest rates are lower. Refinancing also makes sense if the value of your home has increased over time paving the way for a better deal with the lender.

Few people know that reverse mortgage loans can be refinanced. But you have to bear in mind that it is always important to compare the benefits that you can get against the cost or expenses involved in refinancing. As a rule of thumb, the benefits that you should get from refinancing reverse mortgage should be twice bigger than the costs.

Before applying for reverse mortgage loan refinancing, you may want to consider the following important points first.

You Pay More when You Want Longer Payment Time

If you secured longer payment time, then it could mean lower monthly payments. However, do take note that the amount of interest that you have to pay will also increase considerably. What you need to do is to negotiate for a fixed rate when the existing interest rate in the market is lower. This may result to a better deal for you. But do not forget that the accrued interest will increase the total sum of your loan. A bigger debt therefore could bring unpleasant surprises for your heirs.

Consider Payment Time

As a loan, a reverse mortgage must be paid back. The pay back time however for a refinanced reverse mortgage could take years. The refinanced reverse mortgage is due for payment when you move to a new residence, if the borrower passes away, or if you sell the home.

The lender will calculate the final amount that you have to pay. The final amount includes the capital, accrued interest, and the loan costs. If the total costs exceed the value of the home, then the lender will collect the difference from the mortgage insurance to fully pay the loan.
Understand the Non-Recourse Nature of Reverse Mortgage

Few borrowers understand what non-recourse loan is. This type of loan simply means that the lender can not use any other asset of the borrower as payment for the cost of reverse mortgage. The non-recourse nature of reverse mortgage protects the borrower. It is also the reason why you will not be required to produce credit history or income information. The lender’s guarantee is the mortgage insurance. The insurance makes sure that the lender will get his money back.

Difference of Reverse Loan and Home Equity Loan

Both loans use the equity of your home so you can get cash. These loans have similar goals. By using part of the equity, you will be able to draw money by converting the equity to cash. However, home equity loans must be paid back regularly. In contrast, a reverse mortgage loan does not require monthly payments. The payment will become due when the loan will be closed.

Your reverse mortgage loan could become payable if you violate certain terms. These terms include paying the property tax, home insurance, and homeowner’s association dues. You are also under obligation to repair and maintain the property.