Can You Refinance a Reverse Mortgage?

By Bill Lyons | Published on January 28, 2025

Why Refinance Your Reverse Mortgage?

There are several compelling reasons that make a reverse mortgage refinance worthwhile, and knowing when to refinance can help you maximize the benefits. Here are situations when it’s beneficial to refinance your reverse mortgage:

• Lower interest rates: If market rates have dropped significantly since you got your reverse mortgage, refinancing your mortgage could help you preserve more equity over time.
• Increased home value: Refinancing could let you access more equity if your property has appreciated substantially.
• Adding a spouse: If you got your reverse mortgage before marriage, refinancing allows you to add your spouse to protect their right to stay in the home.
• Different loan terms: You might want to switch from a variable to a fixed mortgage rate or adjust your payment structure.
• Converting to traditional mortgage: Some borrowers choose to refinance into a conventional loan if they want to leave the home to their heirs with more equity.

Can a Reverse Mortgage Be Refinanced?

You have several options when it comes to refinancing a reverse mortgage. You can either:

1. Refinance into another reverse mortgage: This is the most common choice, especially if you’re happy with your current loan structure but want better terms. You might choose this option to lock in a lower interest rate, borrow against increased home value, or add your spouse to the loan. The key benefit here is that you’ll continue receiving payments or having access to a line of credit without needing to make monthly payments yourself.
2. Convert to a traditional mortgage: Some homeowners choose this path when their financial situation changes. Maybe you’ve inherited money or your income has increased and you’re now comfortable making monthly payments. Converting to a traditional forward mortgage means qualification now depends on your income and credit score, but it can help you build equity quickly and potentially leave more to your heirs.

Each option has advantages, but the best choice depends on your financial goals. For example, refinancing into a traditional mortgage might make sense if you want to leave your home to your heirs with more equity. On the other hand, if you’re looking to access more equity while staying in your home, refinancing into another reverse mortgage could be the better choice.

Before making a decision, it’s worth reviewing the pros and cons of reverse mortgages to understand if staying with this type of loan aligns with your long-term financial plans.

How a Reverse Mortgage Refinance Works

The process of refinancing a reverse mortgage varies depending on whether you’re getting a new reverse mortgage or converting to a traditional loan.

When refinancing to a new reverse mortgage, the process is similar to getting your original loan. You’ll need to:

1. Complete required counseling with a HUD-approved counselor: Just like the first time you took out your loan, you’ll meet with a counselor who will explain how refinancing affects your equity, review your options, and make sure you understand the costs.
2. Submit a loan application: Your lender will collect documents like your current mortgage statement, tax returns, and proof of income. They’ll also check that you’re current on property taxes and homeowner’s insurance.
3. Have your home appraised: An appraiser will visit your home to determine its current market value. This is crucial because your home’s value affects how much you can borrow. If your home has increased in value, you might be able to access more equity.
4. Meet financial requirements: You’ll need to prove you can keep up with property taxes, insurance, and home maintenance. Lenders will verify your income sources and review your payment history on your current reverse mortgage.
5. Close on the new loan: At closing, your old reverse mortgage gets paid off, and you’ll start fresh with your new loan terms.

The new loan pays off your existing reverse mortgage, and any additional available equity can be accessed through your preferred payment method.

If you refinance your reverse mortgage into a traditional loan, you’ll need to:

1. Qualify based on income and credit score: Unlike your reverse mortgage, you’ll need to prove you can handle monthly payments. Lenders will review your income, credit score, and debt-to-income ratio, just like with a regular mortgage application.
2. Pay off the entire reverse mortgage balance: Your new traditional mortgage needs to cover your entire reverse mortgage balance, including any fees and interest that have built up. Your lender will help calculate the exact payoff amount.
3. Begin making monthly payments: This is the biggest change you’ll experience when refinancing from a reverse mortgage to a traditional one. You’ll begin making regular monthly mortgage payments, including principal and interest. The upside? Each payment helps build equity in your home.

This option makes sense if you want to build equity for your heirs or if you’ve had a significant income change that allows you to manage monthly payments.

Want to explore your options? Use the Griffin Gold app to calculate potential savings and compare different loan types.

Reverse Mortgage Refinance Requirements

To qualify for refinancing a reverse mortgage, you’ll need to meet several requirements:

• Be at least 62 years old: This age requirement applies to all borrowers on the loan. If you’re refinancing to add a spouse who isn’t 62 yet, you’ll need to wait until they reach this age if they want to become a co-borrower.
• Own and occupy the home as your primary residence: Your home needs to be where you live most of the year. Vacation homes and investment properties don’t qualify for reverse mortgage refinancing.
• Have sufficient equity in your home: You’ll typically need at least 50% equity to refinance. The exact amount depends on your age and current interest rates. The older you are, the less equity you might need.
• Have no federal debt: You can’t be delinquent on any federal debt, including federal student loans or taxes. If you have a payment plan in place, you might still qualify.
• Meet FHA property requirements: Your home must be in good condition and meet FHA standards. This means no major structural issues, working utilities, and a sound roof. Most single-family homes, FHA-approved condos, and manufactured homes that meet FHA requirements qualify.
• Maintain property taxes and homeowner’s insurance: You need to be current on your property taxes and keep adequate homeowner’s insurance. Falling behind on either could disqualify you from refinancing.
• Complete HUD-approved counseling: This requirement helps protect borrowers by ensuring you understand how refinancing affects your loan terms and equity. The counselor will review your options and answer any questions about the process.
• Wait at least 18 months from your current reverse mortgage closing date: This “seasoning requirement” exists to ensure refinancing provides a genuine benefit. During this time, your home may have appreciated in value, potentially giving you access to more equity.

To learn more about qualifying requirements and loan options, check out our guide on types of reverse mortgages.

How Much Does It Cost to Refinance a Reverse Mortgage?

When refinancing a reverse mortgage, you’ll encounter several closing costs similar to your original reverse mortgage. The primary expenses include:

• Mortgage insurance premium (MIP): This FHA-required insurance protects both lender and borrower, calculated as a percentage of your home’s value.
• Origination fee: Covers the lender’s cost of processing your loan, typically calculated based on your home’s value with certain federal limits.
• Third-party fees: These include appraisal costs to determine your home’s current value, title insurance to protect against property rights issues, and various credit report and recording fees.
• Counseling fee: HUD-approved counseling is required to ensure you understand the refinancing process and its implications.

Overall closing costs typically range between 2% to 6% of your loan amount, though these costs can often be financed into your new loan rather than paid out of pocket.

See If Refinancing a Reverse Mortgage Is Right for You

Taking the leap to refinance your reverse mortgage is a big decision. The team at Griffin Funding works with homeowners like you every day, helping make sense of the refinancing process and finding solutions that actually work for your lifestyle.

Want to know if refinancing makes sense for you? Let’s talk. Our loan officers will help you weigh your options without any pressure. Reach out to us today or check out our Griffin Gold app to get started. We’re here to help you make the right choice for your future.

Bill Lyons

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.