Reverse Mortgage Refinance
You can refinance a current HECM into a new one, or use a new HECM to pay off a regular mortgage or HELOC. Each path has its own timing rules, and a HECM-to-HECM refinance has to pass benefit tests.
Quick answer
Saxton Mortgage does. At least one HECM program we offer refinances an existing HECM into a new HECM, or refinances a regular mortgage or HELOC into a HECM. For a HECM-to-HECM refinance, the new FHA case number must be assigned at least 12 months after the prior HECM closed, and the increase in principal limit must be at least five times the total closing costs.
What a HECM refinance requires
Each item below is an FHA HECM rule or a requirement of our reverse mortgage program.
- The new loan’s FHA case number is assigned at least 12 months after your current HECM closed.
- The increase in your principal limit is at least five times the total closing costs.
- After the old HECM and closing costs are paid, our program’s standard test looks for at least 5 percent of the new principal limit to be left for you.
- Within three days of application, you receive HUD’s anti-churning disclosure showing the estimated total cost, the change in your principal limit and any added funds.
- You complete counseling with a HUD-approved HECM counselor. Our program processes the application once the signed and dated certificate is in.
- Any other lien on the home must be fully paid off by closing. Our program does not allow subordinate financing to stay in place.
Refinance HECM to HECM
Pay off a regular mortgage
Newer HELOCs have a path
Twelve months of seasoning
Benefit tests protect you
Counseling comes first
How Does A Reverse Mortgage Refinance Work?
There are two paths. A HECM-to-HECM refinance replaces your current HECM with a new one, or a new HECM pays off a regular mortgage or HELOC on your home.
A HECM-to-HECM refinance is a new HECM whose proceeds pay off your current HECM and any other eligible lien. HUD has anti-churning rules because repeated refinances can generate fees without a financial benefit to the borrower. Within three days of your application, you receive form HUD-92901 showing the best estimate of total cost, the increase or decrease in your principal limit, and any added HECM funds. If the new principal limit would be lower, it shows as a negative number.
Our reverse mortgage program applies four tests to a HECM-to-HECM refinance. The new case number must be assigned at least 12 months after your current HECM closed, and the increase in principal limit must be at least five times the total closing costs. A loan proceeds test and a principal limit test check how much the new loan adds for you. A HECM that is terminated or already due and payable cannot be refinanced this way.
If you have a regular mortgage or HELOC instead, a new HECM can pay it off when the lien has been in place more than 12 months before the HECM closing, or when you received $500 or less in cash from it. Under our program, a lien 12 months old or less that gave you more than $500 in cash must be paid outside of closing, or the loan is declined. An unseasoned HELOC is the exception. For more on that path, see our paying off a mortgage with a reverse mortgage page.
Why review a reverse mortgage refinance with Saxton
This page is for homeowners 62 and older who already have a HECM, or who have a regular mortgage or HELOC they want to replace, and for adult children helping them decide.
Benefit Tests Come First
Our program checks seasoning, closing costs, loan proceeds and the change in principal limit on every HECM-to-HECM refinance.
You See The Numbers
HUD’s anti-churning disclosure shows the estimated total cost, the change in your principal limit and any added funds within three days of application.
Condo Refinances Skip Approval
A condo refinanced HECM to HECM does not need condo project approval or single-unit approval.
A Discharged Bankruptcy Can Work
A discharged bankruptcy does not affect qualification for a HECM-to-HECM refinance if you meet the other guidelines, though part of your proceeds may be set aside for property charges if the circumstances are not documented.
Only Home Debts Get Paid
Only debts attached to the home can be paid at a HECM closing. Credit cards and installment loans cannot, and judgments not recorded against the home must be paid from your own funds.
Newer HELOCs Have A Path
A HELOC that has not met the 12-month rule can still be paid off at closing with your funds, HECM proceeds or both, within HUD’s limit.
Hear From Homeowners Like You
Frequently Asked Questions
Straight answers about reverse mortgage refinances.
Saxton Mortgage does. At least one HECM program we offer refinances an existing HECM into a new HECM, or refinances a regular mortgage or HELOC into a HECM. For a HECM-to-HECM refinance, the new FHA case number must be assigned at least 12 months after the prior HECM closed, and the increase in principal limit must be at least five times the total closing costs.
Yes, if the new loan meets our program’s tests. The new FHA case number must be assigned at least 12 months after your current HECM closed, and the increase in your principal limit must be at least five times the total closing costs. The program also applies a loan proceeds test and a principal limit test. A HECM that is terminated or already due and payable cannot be refinanced this way.
They measure how much the refinance adds for you. Under our program’s standard tests, at least 5 percent of the new principal limit should remain after the old HECM and closing costs are paid. The increase in principal limit should be the greater of $20,000 or 15 percent of the principal limit when the new principal limit is under $250,000, and more than $30,000 when it is $250,000 or more.
Plan on it. Counseling with a HUD-approved HECM counselor is part of the process, and our program processes your application only after the signed and dated counseling certificate is in. The certificate stays valid for 180 days from the day counseling is completed.
Churning is when a lender refinances a HECM again and again to earn fees, with no financial benefit to the borrower. To guard against it, HUD requires form HUD-92901 within three days of application. It shows the best estimate of the total cost, the increase or decrease in your principal limit, and any added HECM funds. A decrease shows as a negative number.
Yes, when the lien has been in place more than 12 months before the HECM closing, or when you received $500 or less in cash from it at closing or through draws. Under our program, a lien 12 months old or less that gave you more than $500 in cash must be paid outside of closing, or the loan is declined. For a newer lien, we need the settlement statement from when it closed.
An unseasoned HELOC is the exception. It can be paid off at the HECM closing with your own funds, HECM proceeds or a combination, as long as the initial disbursement stays at or under HUD’s limit of 60 percent of the principal limit. We also need your most recent HELOC statement.
No. Our program does not allow subordinate financing, so other liens are paid off at closing. Only debts attached to the home can be paid at a HECM closing. Credit cards and installment loans cannot, and judgments not recorded against the home must be paid from your own funds.
Find out what you qualify for
Tell us about your current loan and what you want the refinance to do, and we will check it against the rules above.
Get Pre-Qualified- U.S. Department of Housing and Urban Development, FHA and housing resources
- U.S. Department of Housing and Urban Development, FHA mortgage insurance premiums
Loan amounts, rates, terms, and eligibility are subject to credit approval, asset and income verification, appraisal, and program guidelines. Program availability varies by state. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.