Fact-checked by Peter Warden.
- Reverse mortgages allow homeowners 62 and older to access home equity without making monthly payments.
- Reverse mortgages don’t need to be repaid until the last borrower passes away, moves out, or the home is sold.
- When you refinance a reverse mortgage, you replace one mortgage with another — either a new reverse mortgage or a traditional loan.
Because home values have risen substantially over the past several years, you might be wondering whether it’s possible to refinance a reverse mortgage. While the process works similarly to a traditional refinance, it’s important to understand how it would work and whether it makes sense for your financial situation.
Why Refinance a Reverse Mortgage?
There are several reasons a homeowner might consider refinancing a reverse mortgage.
Access Additional Equity
Home values have increased significantly in recent years. By refinancing your reverse mortgage, you may be able to tap into that appreciation and access additional equity — helping you fund retirement or cover other financial needs.
Interest Rates Have Declined
If rates have dropped since you took out your reverse mortgage, refinancing could reduce the finance charges that will accrue over time.
HECM Limits Have Increased
If the HECM (Home Equity Conversion Mortgage) lending limits have risen since you took out your loan, refinancing could give you access to additional funds.
Switch to a Traditional Mortgage
If your financial situation has changed, or your heirs want to keep the home after you pass, you might decide to refinance out of the reverse mortgage and back into a traditional loan.
Switch From an Adjustable Rate to a Fixed Rate
Reverse mortgages can carry fixed or adjustable rates. If you have an adjustable-rate reverse mortgage and believe rates are heading higher, refinancing to a fixed rate can provide stability.
Add a Spouse to Your Loan
If you pass away, a non-borrowing spouse may be required to repay the reverse mortgage. Refinancing to add them to the loan can offer protection — giving them the option to stay in the home until their own death rather than being forced to sell.
How Refinancing a Reverse Mortgage Works
When you refinance a reverse mortgage, you pay off the current mortgage with a new one. You can refinance into another reverse mortgage or into a traditional mortgage. Requirements differ slightly between the two paths.
Refinancing Into Another Reverse Mortgage
If you refinance into a new reverse mortgage, your loan amount will be based on your age, home value, and current interest rates. You can receive the funds as a lump sum, a line of credit, or monthly payments.
Refinancing Into a Traditional Mortgage
You can also refinance out of a reverse mortgage and into a traditional loan. Your new loan amount will be based on your income, credit profile, and current rates. You’ll pay off the reverse mortgage balance and begin making monthly mortgage payments again.
If you still need access to equity for ongoing expenses, a cash-out refinance can help you accomplish that while also converting to a traditional mortgage structure.
Eligibility to Refinance a Reverse Mortgage
To refinance a reverse mortgage, you’ll generally need to meet the following requirements:
- The home must be your primary residence. Reverse mortgages are not available on investment properties or second homes.
- You must be 62 or older. Reverse mortgages are only available to borrowers age 62 and up.
- You need sufficient home equity. You must have built up a meaningful amount of equity in the home to qualify.
- You must demonstrate financial stability. Lenders want to see that you can cover property taxes, insurance, and maintenance — even without a monthly mortgage payment.
- You must be current on all federal debt. This includes federal income taxes and federal student loans.
- No reverse mortgage refinance in the past 18 months. You cannot refinance a reverse mortgage if you’ve done so within the last 18 months.
Reverse Mortgage Refinance: Pros
- Access to additional funds if your home’s value has increased
- Potentially better terms that slow the rate of loan balance growth
- Ability to retain more equity by switching to a traditional mortgage
- Protection for a non-borrowing spouse by adding them to the loan
Reverse Mortgage Refinance: Cons
- Monthly payments resume if you refinance into a traditional mortgage
- Closing costs can be substantial
- Accessing more cash reduces the equity left for heirs
- Generally only makes financial sense for those with at least 40–50% equity in the home
Alternatives to Refinancing a Reverse Mortgage
Before moving forward with a reverse mortgage refinance, it’s worth considering these alternatives.
Modify Your Repayment Terms
If your goal is simply to switch between the available adjustable-rate repayment plans, you may not need to refinance at all. Contact your mortgage servicer — they can typically handle this change with minimal paperwork and a small fee.
Sell Your Home
If you don’t have a strong attachment to the home and aren’t planning to leave it to heirs, selling may be the simplest path. Request a payoff quote from your servicer first so you know exactly what you’ll owe, and compare that against your home’s current market value. Don’t forget to factor in realtor commissions and your costs for a new place to live.
Refinance Into a Traditional Mortgage
If you want to keep the home in the family after you pass, refinancing into a traditional mortgage lets you do that. A cash-out refinance can help if you also need access to equity for ongoing retirement expenses — you can pay off the reverse mortgage, access funds as needed, and repay the balance over a 15- or 30-year term.
Talk to a Professional
The decision to refinance a reverse mortgage is complex and highly personal. Meeting with a financial planner alongside a mortgage professional can help you weigh all of your options and choose the path that makes the most sense for your situation.
Start exploring your refinance options with Refi.com today.
