Can I Refinance an FHA HECM Loan?
HECM loans feature zero monthly mortgage payments--borrowers pay off a HECM loan in full if the property is sold or when borrower dies. ECM loans let the borrower use proceeds from the loan as a line of credit or receive monthly payments instead. Borrowers also have the option of combining the two options.
Home Equity Conversion Mortgage loans can also be refinanced under the right circumstances including when the FHA HECM borrower needs to add a spouse to the mortgage. Doing so offers a distinct advantage.
When one person only is named on a HECM loan, the mortgage would be due if the borrower dies. When a HECM mortgage loan has both occupants of the home named in the note, the second borrower is protected against the loan coming due-the terms of the reverse mortgage would be in effect as long as the surviving borrower continues to own the property.
FHA rules also let the homeowner take advantage of any additional equity built up in the home since the original reverse mortgage--refinancing is possible to add that equity to the loan amount.
In both cases, the borrower has the option to refinance into a standard FHA HECM loan or the more recent HECM Saver, which features savings on up-front mortgage insurance premiums.
The requirements for standard reverse mortgages and HECM Saver loans vary-check with your FHA regional loan center or loan officer to get details on which FHA reverse mortgage is best in your situation.
Standard occupancy rules apply to HECM loans the same as any other FHA home loan for single-family residences-the borrower(s) must certify that the home is the primary residence. Summer homes do not qualify for HECM type loan guarantees from the FHA because they cannot be considered a primary residence.
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