Reverse mortgage refinance

Through a reverse mortgage refinance, a new loan pays off your current HECM. In HUD's latest twelve months of data, 2,666 HECMs were recorded as refinances. It can pay if your home is worth more, if the HECM limit has risen, if you are older or if rates have fallen. A new set of closing costs applies, and the gain must be worth that cost.

You can also end a HECM without refinancing it. You can sell the home, pay the balance using savings or move to a regular mortgage.

When refinancing a HECM can pay

A new HECM uses current figures rather than those from your first closing. These can each raise the amount:

• Your home now has more value. The maximum claim amount rises with a higher appraisal.
• The limit is now higher. HUD's announcement says the HECM limit went from $1,209,750 in 2025 to $1,249,125 in 2026. You need a home value above the old limit for this to matter.
• Your age is higher now. HUD's factor goes up as you age.
• Rates are at a lower level. A lower expected rate results in a higher factor.
• You want to include a spouse. A new loan can include a spouse who has reached 62, or list that spouse as an eligible non-borrowing spouse.
• A different loan is what you want. One option is replacing a fixed lump-sum HECM with an adjustable HECM that has a line of credit.

A worked example

Consider a HECM that you took out at 70 on a $450,000 home. The home appraises at $600,000 when you are 78 eight years later, and the balance is $150,000.

A full 2% premium is charged by the calculator. For a HECM-to-HECM refinance, FHA usually provides credit for the first loan's premium, which may make a lender's figure better. Enter your figures in the calculator, and list your current HECM balance as the amount owed on the mortgage.

FHA's test for a HECM-to-HECM refinance

FHA rules stop lenders from churning borrowers through loans that mostly earn fees. Lenders must show that the new money gained is large compared with the new loan’s cost before a HECM-to-HECM refinance. A written comparison of both loans must also be provided to you.

A waiting period also applies after your last HECM closed. Before paying for an appraisal, request the lender's test result in writing. Counseling is also required again, although the counselor may provide a shorter session for a refinance.

The costs of refinancing

Refinancing brings another set of upfront HECM costs:

• mortgage insurance, with credit for the first loan's premium often reducing it
• Under 24 CFR 206.31, the origination fee may be up to $6,000.
• Appraisal costs, title costs and other closing costs

The new balance grows by these amounts. Each rule appears in the costs guide.

Refinancing into a regular mortgage

A HECM can be refinanced into a forward mortgage, which is a regular loan with monthly payments. People choose this option when:

• they wish to prevent the balance from growing
• after the borrower has died, an heir wants to keep the home
• rising borrower income has made the payment easy

To qualify for a regular mortgage, you need income and credit. It also restores a monthly payment. What you receive in return is a debt that goes down instead of up.

Can you pay off a reverse mortgage early?

Yes, you can. Under HECM rules, you may pay some or all of the balance whenever you want without an early-payment penalty.

• Payoff in full. Request a written payoff figure from the servicer, then cover it with savings, the proceeds from a sale or a new loan.
• Making partial payments. Every payment reduces what you owe. With an adjustable HECM that includes a line of credit, repayments return to the credit line and continue growing.
• Monthly payments if you choose. You can slow the balance by making a payment each month, as you would with a regular mortgage. These payments are not required.

How can you get out of a reverse mortgage?

1. Sell your home. After the HECM is paid from the sale, you receive the remaining money.
2. Pay off the loan. Use savings, an inheritance or other money.
3. Refinance with a regular mortgage. If you are able to qualify for the payments.
4. Refinance with a new HECM. If the test above finds a real gain.
5. Cancel immediately after closing. A new HECM comes with a short cancellation window. The lender must return what you paid for the loan within 20 days, according to the CFPB.

Questions people ask

1. Is a reverse mortgage refinance worth it?

   The new loan must provide a clear gain after covering its costs. Common reasons include a sharp increase in home value, a higher limit or getting several years older.

2. Can I leave a reverse mortgage through refinancing?

   Yes, you can. With a new HECM or a regular mortgage that has monthly payments, you can refinance if you qualify for that loan.

3. Can you use another reverse mortgage to refinance a reverse mortgage?

   Yes, by completing a HECM-to-HECM refinance. Under FHA rules, the lender must show a gain that is large compared with the cost. You must also attend counseling again.

4. Is refinancing a reverse mortgage possible for an heir?

   An heir can secure a regular mortgage, pay off the HECM with it and keep the home, but cannot take over the HECM. The heir's payment cannot exceed 95% of the home's appraised value when that value is less than the balance.

5. Can you pay off a reverse mortgage without losing your house?

   Yes, you can. Once you pay the balance in full, the loan and lien end, and you keep the home without a reverse mortgage.

6. Can you make monthly payments on a reverse mortgage?

   Yes, provided you want to. With HECMs, you may choose to make voluntary payments in any amount at any time, with no penalty; no payments are required.