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Today we’re going to talk about Reverse Mortgage Refinances (and yes there is such a thing :)). Many people who even have a reverse mortgage don’t know that you can refinance a reverse mortgage. Reverse mortgage refinances are basically the same process; application, counseling, appraisal, so on and so forth. Reverse mortgages the second time around are cheaper because you’ve already paid fees like the upfront mortgage insurance premium. So you will get a credit for what you’ve paid into that so far.
A real good reason to do a reverse mortgage refi – well there are a few. One of which and one that comes to mind for most people is that the equity position in their home goes up because their value goes up. If your equity position goes up enough, you can do a reverse refi to get additional cash out. Most lenders have a rule called the “5 times rule” where they want you to be getting 5 times as much benefit as cost. There are ways around that if need be. For instance, if you have a spouse that was previously a non-borrowing spouse and now is old enough to be added to the reverse mortgage, you can get around that rule that way and do a refinance to add them.
Another real important thing that is going on right now – people even just as far as a few months ago who obtained a reverse mortgage and had an adjustable rate reverse mortgage would have had a much higher interest rate cap. The interest rate caps could be anywhere from 12 to – in some cases – almost 16 percent. The new caps on these are much lower.
So the way they calculated the old cap is it would be 10 percent above the start rate of the loan. So if your rate was 3, then your cap would be 13 percent. Lenders across the board now have come up with a new loan that’s a “Cap 5” or the “Annual Cap 5” – depending on the lender. What that means is that the new rate cap is 5 percent above the start rate. So that means obviously that the cap would be 5 percent lower across the board. Several people are taking advantage of this and obviously we don’t know where the market is going to go…it may never go high enough for that to matter but it might.
If we reach a period in the market like, say the late 70’s, and you see interest rates of 18-20%, those people with the older reverse mortgages are going to see caps of 12, 15, 16 percent. The people with the new ones are going to see them closer between 7-8 percent. This is obviously very valuable and the entire process is very simple particularly easier than people who did the loan several years ago.
I’d be happy to talk to you about reverse mortgage refinances and see if it is something that is right for you – if there is a reason to do it like adding a non-borrowing spouse to the loan and to title. Or to get that lower rate cap or even just to get some additional money – several people are taking advantage of that. One reason is the lower cost the second time around because of that mortgage insurance premium credit (for the first time you paid it). Loan officers, like me, are often times willing to waive originations fees completely for repeat customers – in some cases, we can even credit closing costs.
Call me today to find out more about reverse mortgage refinance. Even if you did not get your reverse mortgage through me, you can come to me for the refinance and we can see if it’s a benefit to you and see if we can move forward.
Hope this was informative and look for several more videos on more topics on USAReverseMortgages.net.
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