How to Refinance a Reverse Mortgage
Since conventional lenders are not able refinance a reverse mortgage in most situations, heirs are left with few options. Thankfully there are hard money lenders able to refinance a reverse mortgage in California. The hard money lender is able to make a loan to the estate and then allow the loan to be assumed and personally guaranteed by the heirs. Once this loan transaction has been completed the title to the property will be in the name of the heirs. Now that the title is in the name of the heirs they will be able to refinance into a lower-cost conventional loan.
A reverse mortgage refinance from a hard money lender can be funded within a week or two. This is a huge benefit to heirs who finds themselves in a situation where the original reverse mortgage lender has proceeded with foreclosure, leaving the heirs with limited time to act.
Reverse mortgages (also known as a home equity conversion mortgage (HECM)) are available to homeowners who are at least 62 years old and own their home with no existing mortgage or a have a small mortgage balance relative to the value of the home. A reverse mortgage is a home equity loan that does not require monthly mortgage payments while the borrower/home owner is alive and lives in the property. When the reverse mortgage borrower sells the property, no longer lives in the home or passes away the reverse mortgage loan will become due.
A reverse mortgage cannot be assumed by a deceased borrower’s heirs. The heirs must either sell the property or refinance the reverse mortgage if they intend to keep the home. Heirs wishing to refinance the reverse mortgage may have up to 12 months to complete the refinance.
Lenders don’t immediately foreclose on homes with reverse mortgages upon the death of the borrower. Heirs have the opportunity to pay off the reverse mortgage, sell the property or refinance the reverse mortgage. Reverse mortgage lenders often allow the heirs 6 to 12 months. The heirs must show the reverse mortgage lender they are taking action to have the loan paid off.