While interest rates continue to remain low1, many seniors, especially those on fixed incomes, may be interested in lowering their monthly mortgage payments. Some have found that refinancing their current mortgage is a valuable option to freeing up more cash.
There are a few refinancing options for seniors that may be a benefit:
Rate and Term Refinance:
A rate and term refinance option can lower interest rates and the total amount of the loan balance. The monthly payments will be decreased by extending the loan term. However, the requirements for refinancing a traditional mortgage maybe a little more difficult for those on a fixed income.
Seniors who have built up housing wealth may be able to benefit from a cash-out refinance. A cash-out refinance occurs when a new loan is taken out on the home and the loan amount is higher and a cash payout, sometimes referred to as loan proceeds, is taken in return.
Home Equity Loan:
While not a traditional refinance option, a home equity loan is based on the amount of equity currently in the home. You are taking out a second mortgage, and continue to have a monthly payment; but, you will have more cash on hand to reduce other debts or pay for additional expenses.
Home Equity Conversion Mortgage (HECM):
An option for senior homeowners who are 62 years and older is to refinance their conventional mortgage into a reverse mortgage loan. A reverse mortgage allows you to access a portion of your home equity as cash while remaining in your home and maintaining ownership.2
A reverse mortgage, unlike a conventional mortgage, does not require monthly mortgage payments for as long as you live in the home as your primary residence, maintain it per the Housing and Urban Development (HUD) guidelines, and pay property taxes and homeowner’s insurance.3
By refinancing your conventional mortgage with a reverse mortgage you may be able to eliminate your monthly mortgage payment,4 which may free up additional funds.
If you’re on a fixed income and looking to access your housing wealth with a reverse mortgage, call 800.976.1600 to speak with a licensed reverse mortgage advisor.
2 You will retain the title and ownership during the life of the loan, and you can sell your home at any time (at which time the loan becomes due). The loan will not become due and subject to repayment as long as you continue to meet loan obligations such as living in the home as your primary residence, maintaining the home according to the Federal Housing Administration (FHA) requirements, and paying property taxes and homeowners insurance. Failing to meet these requirements can trigger a loan default that may result in foreclosure.
3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.
4 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.