Refinance A Reverse Mortgage: Good or Bad?
01 August 2017
Just like a conventional (forward) mortgage, it is possible to refinance a reverse mortgage. But because of its unique structure, the computation and considerations involved are different, so it’s usually a good idea to investigate fully and consult your financial adviser or mortgage broker first. There are a number of objectives you could have when Reverse Mortgage refinancing.
Interest or fee savings
A refinance of an existing Reverse Mortgage may deliver significant interest savings over the long-term, especially if there is a substantial interest rate differential between the old lender and the new one.
However, although interest rates may have declined when you initially obtained the home equity loan, the difference may not be sufficient to offset refinancing fees and save over the term of the reverse mortgage. This means that it is crucial to check the fees involved in refinancing your reverse mortgage loan first. This financial decision can be justifiable if it produces additional funds that are significantly greater than the upfront cost, or if the provider you refinance with has significantly lower (or no) ongoing monthly or annual fees.
Reverse mortgages are generally repaid when you move out of your home or pass away, which is a different consideration to a traditional mortgage.
Accessing more funds through Reverse Mortgage Refinancing
A reverse mortgage can be refinanced to increase the size of the loan and secure more funds – if there is a genuine need for extra money and you meet criteria. Basically, as you get older, most lenders allow you to unlock a higher portion of your home equity as the percentage available is based on your age. There is also the possibility that your home has increased in value, which may entitle you to more cash, however Refinancing may also not be recommended or available if your home value has not improved by enough to allow additional funds.
Restructure of loan draws
In addition, there is no need for refinancing if your objective is to change the method of your funds distribution, or how you access your loan. For example: if you wish to switch from a monthly payment instalment to a line of credit option. However, this is dependent on your provider.
If you have an existing reverse mortgage loan with Heartland, you can consult our staff to explore other loan drawdown options or if you are able to borrow additional funds from your existing reverse mortgage.
Why Do You Need to Refinance Your Reverse Mortgage?
Before you decide to refinance your home equity loan, be sure to that you are clear with your motivation. Do you really need more cash, or are you just trying to obtain more funds so you can keep up with your retirement? This is a crucial matter to discuss with your loved ones as well as your financial advisers.
[Related Post: How to use a Reverse Mortgage to pay off debt]
Heartland Seniors Finance Can Help
Heartland Seniors Finance is Australia’s leading reverse mortgage provider, and has assisted thousands of people aged 60 and over release equity from their home. Heartland is also proud to be Canstar’s 2017 Reverse Mortgage Provider of the Year, and to have won the Money Magazine Best Reverse Mortgage for seven consecutive years.
A market leading product and personal service makes Heartland Seniors Finance the reverse mortgage lender of choice for many Australian seniors.
Please feel free to call us on 1300 889 338 and talk to one of our reverse mortgage specialists if you would like to see if we could help you to in your decision to refinance your reverse mortgage.
Information provided is accurate as at 01 August 2017 and may change from time to time