Can You Refinance A Home Equity Conversion Mortgage?

Can you refinance a home equity conversion mortgage? Yes, this is where you pay off an existing HECM with a new HECM loan. And here's why...
Can You Refinance A Home Equity Conversion Mortgage

The answer is obviously yes.  If it were no, this would be a very short article.

What do I mean by “refinance a Home Equity Conversion Mortgage (HECM)”?

This is where you pay off an existing HECM with a new HECM loan.  But why would someone want to do this? There are several reasons:

  • Property values may have increased from normal appreciation or renovations.  Refinancing the HECM allows you to access additional equity in the home.
  • You might want to change the loan terms – adjustable rate to fixed rate or visa-versa.  
  • Lower rate or ongoing MIP charges.  

Side Note – Prior to October 2017, the ongoing mortgage insurance premiums (MIP) were 1.25% of the loan balance.  However, after October 1, 2017, it was reduced to 0.50%.  Refinancing a loan that originated before October 2017 would save 0.75% without even reducing the margin on the interest rate.

  • You may wish to add your spouse to the loan.  If you took the loan out before your spouse was 62 years old, or have married since you had the HECM, adding him/her to the loan would provide them additional protections.

If you have had your HECM loan for more than a dozen years, (prior to 2008), the value used in the calculation to determine the loan amount may have been capped by county lending limits.  In 2008 The Housing and Economic Recovery Act (HERA) established a national lending limit.  This limit was just increased for the sixth time in January 2021 to $822,375.  For people with higher-valued homes, who have had their HECM since before 2008, refinancing would allow them to tap into much more equity.

If you have had your HECM for more than 12 months and live in Colorado, you have been buried with mail solicitations (and sometimes phone calls) of people trying to talk you into refinancing.  This may be a good idea, but it may not.

What are the benefits of refinancing my HECM?

The National Reverse Mortgage Lenders Association (NRMLA) has issued guidance to lenders to discourage “loan flipping” or “churning”.  This a when lenders refinance people without clear benefits just so they can earn a commission.

There needs to be a benefit to you to refinance a reverse mortgage.  There are two tests that musted be passed to prove refinancing your reverse mortgage is a benefit.  The first is called the “Closing Cost Test”.

Simply put, the increase in the amount of money available to you must be at least five times the cost of the transaction.  If the costs to refinance are $4,000, you must increase the amount of money available by $20,000.

The other test is the “Loan Proceeds Test”.  The benefit from the refinance must be at least 5% of the new loan amount.  For example, if your new loan amount is $300,000, the new additional funds available must be at least $15,000.  

If you pass these two tests, then there is a benefit to you refinancing your HECM reverse mortgage.  Now the question becomes

Should you refinance your HECM?

I personally very rarely solicit anyone to refinance their HECM loan.  The reason is that I receive calls from people every week who are inundated with solicitation mail and calls from out of state lenders wanting to refinance them.  For some, there is a benefit and they qualify, others do not qualify because they do not have enough equity, and still others, while they qualify and there may be a benefit, there is no reason.

Some of my customers have huge amounts of money in their line of credit, they have the lower MIP, and because they have an adjustable-rate, their interest rate is very low (or will be son when it adjusts).  There is no reason for this customer to refinance.  

I just received a call from a customer who I did a reverse mortgage for about two years ago.  Their ongoing MIP is at 0.50% but their interest rate is over 4%.  They have more money than they will ever need in the line of credit and do not need more.  The people contacting them were telling them they could lower the MIP (cannot happen because it is as low as possible already), and the interest rate.   
I looked up this customer’s information and found that their interest rate will be changing on March 1st. (they are on an annually adjustable rate), and it will be lowering down to about 2.7%.  I explained this to them and now they are just ignoring the solicitations.

I also talk with a lot of folks who I know could use additional funds, but they simply do not have enough equity in their home for us to do it for them.  The lender must be able to loan you at least enough money to pay off the existing HECM loan and pass the two tests discussed earlier.  If you cannot do that because the value of the home is not high enough, we cannot do the refinance for you. 

If you think you might benefit from refinancing your existing HECM reverse mortgage, please call me.  I will let know if it is possible and then we can discuss if it makes sense for your situation.

Bruce Simmons

Bruce Simmons

I absolutely love what I do - working with senior homeowners to help them live a more comfortable, flexible and secure retirement. I have the absolute best customers in the world, and even though I worked in the forward mortgage business for a number of years, I could never go back to doing conventional loans. I'm a 100% reverse mortgage specialist.


My wife and I are retired and had a mortgage that was quite high. We contacted Bruce regarding a Reverse Mortgage and were pleased with his knowledge and experience. He made the whole process very easy and explained everything along the way. Since then, I have had a couple of questions and contacted him regarding the RM. Bruce has always been very responsive and returned our calls within minutes. We couldn't be happier having used Bruce for the Reverse Mortgage and highly recommend him.

Bruce has been serving my interest over and above what one might expect during the whole process of handling my reverse mortgage dating back to 2010 and continues to be available at present whenever a question may arise. He is one of the most reliable, trustworthy and knowledgeable experts regarding reverse mortgages that I have had the privilege to do business with! I would highly recommend Bruce to anyone who is considering a reverse mortgage. Thank you Bruce!

I met Bruce from a referral who just love what he did for them on their Reverse Mortgage, So I contacted Bruce and told him my story and he came up with a great Reverse Mortgage for me and my needs and now I am living good and not worrying about Finances anymore. He had it done in a timely manner. If you are looking for the MAN to help you get the best Reverse Mortgage you need to call him and hope you let him help you.

Bruce is one of the most professional, knowledgeable and efficient experts I have worked ŵith ever in any field. He is fast to answer and always ready to help...and he's a great guy!

Gerald Cook
Gerald Cook

Bruce did our original reverse mortgage and has also refinanced it twice. He works hard to get the best deal possible while making it as easy for us as possible. When our first refinance received a low initial appraisal, Bruce helped the appraiser find better information and increase the appraised value. He's the best.

I was hesitate about getting a reverse mortgage until Bruce Simons put my mind at rest. He is easy to work with, extremely knowledgeable and efficient. Things get done and he will make sure that you understand every part of the process. I interviewed several other people and he was hands down.....The only choice.

Doing a Reverse Mortgage is a major decision, when working with Bruce he came out personally to go over every thing in detail, there was no pressure to finalize the transaction, I had even put the loan on hold for awhile even though I had locked in my rate, I had called Bruce off and on for a few weeks to ask questions that I had concerns about and he was always available to talk to me. In the end it gave me time to feel comfortable about my decision to move forward with the Reverse. Bruce was very pleasant to work with and would certainly recommend Bruce if you are going to consider a Reverse Mortgage.

Bruce Simmons at American Liberty is one of the best in the reverse mortgage industry. I have known and worked with him for years and he always does a great job. You are in good hands with Bruce and know that he will take good care of you or your loved ones every step of the way.

Best thing I ever did! Bruce Simmons at American Liberty Mortgage is the best. He is always there to answer your questions, and can easily explain the whole idea of a Reverse Mortgage. He takes the time and goes through the entire process with you. It worked out so well for me. Thank You Bruce!

We had researched Reverse Mortgages for 5 years and after hearing about Bruce Simmons and meeting with him, we finally decided to move forward with the Reverse Morgage. It has been over a year now and we are still very pleased with our decision. We think Bruce is very professional, knowledgeable and honest. Thank you, Bruce, for all your help.

I first met Bruce Simmons 2017. I found him on the internet. I was looking for someone local. I called him and explained I was only looking into doing a reverse mortgage, so I did not want him to think this was something I was ready to do. Bruce was friendly, very open about the basics of a reverse mortgage. Bruce came to my home and presented the figures and other details that he could offer. The first thing that impressed me was this was not a hard sell, more of a informational meeting. He was very open about all of the details, and answered my questions without hesitation. What really was evident was he was establishing a relationship with me, and I realized he knew I would not take the loan at that time. There was not enough equity in my home, and I would have to bring money to the table. Although I was not ready to do a loan, Bruce assured me he is always available for questions. Four years later, I finally did do a reverse mortgage, and I couldn't be happier with having done it. I have done away with a mortgage payment which allows me to fund my retirement account with that mortgage payment. We did some much needed landscaping with our cash out transaction, and will move on to improvements inside of the house. My reverse mortgage has a line of credit, and I feel sense security knowing it is there if I need it. Bruce explained that a reverse mortgage is not for everyone, but I feel certain that he paved the way for a strategy that worked for me. I will definitely do a refinance when the time is right. I will check in with Bruce to be sure what the benefits are when I do it again.

I have worked with Bruce Simmons for 15 years. Bruce is one of the best in the industry. He is extremely knowledgeable, kinds and detailed in what he does. His clients love working with him and trust him to help them with their Reverse Mortgage loans. I would recommend Bruce to anyone I know that is thinking about or wanting to do a Reverse Mortgage. He will always take very good care of the customers and make sure their needs are met! Class act and one of the best in the industry by far!

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Reverse Mortgage Guide

Reverse Mortgage Guide

This 28-page Consumer Guide will help you make and informed decision whether a reverse mortgage is right for you.

Free E-Book