HECM to HECM Refinance

    • Borrowers with an existing Home Equity Conversion Mortgage (“HECM”) may qualify for a HECM to HECM Refinance, usually referred to as a “Streamline”. Borrowers pay the regular closing costs, but only pay the increased upfront mortgage insurance premium on the increase (if any) in Maximum Claim Amount over the original amount. The fundamental requirements of a Traditional HECM in terms of residual income, age and Expected Interest rates, Maximum Claims and Principal Limits are all the same as described in the section “Basics” on this website.
    • Counseling can be waived, but most lenders want the borrowers to take it again.
    • There is a mandated protection against “churning” (the practice of habitually refinancing mortgage loans with high costs for minimum benefits to the borrower) on HECM to HECM Refinances. Reputable lenders will only permit refinance if the loan is at least 18 months old, is putting a Non-Borrowing Spouse on the title as a new borrower, or meets certain threshold benefits to the borrower (such as the net cash available benefit to the borrowers is 5 times the incremental cost). Some exceptions may be made in certain cases where the borrower’s circumstances are extenuating.
    • Borrowers are subject to Financial Assessment regardless of prior HECM loan qualifications.
    • All HECM to HECM Refinances shall have the following characteristics and meet following requirements:
      1. A HECM may not be refinanced with another HECM within 18 months of obtaining the original FHA Case number.
      2. The HECM Refinance shall either be (a) originated to add a Non-Borrowing Spouse as a borrower, or (b) pass both a Closing Test and a Loan Proceeds Test.
      3. Closing Test: The increase in the Principal Limitof the new HECM should be at least 5 times the total closing costs of the new loan.
      4. Loan Proceeds Test: The net new available amount (which is the new Principal Limit Amount as reduced by the old HECM payoff and the new HECM closing costs) should exceed 5% of the new Principal Limit.
      5. Even if refinancing a Variable Rate into a Fixed Rate, the Closing and Loan Proceeds Tests must be met.
    • And any upfront Mortgage Insurance Premium (MIP) paid on the HECM being refinanced will be credited toward the upfront MIP on the new loan, provided the refinance is done within 5 years of the  HECM being refinanced.
 

Would you like to learn more?

  • Click here for eBrochures, eBooks, FAQs and Videos!
  • If you would like to know how much you potentially qualify for, and whether you possibly have adequate monthly cash flow, go to the HECM WIZARD and input your information.
  • If you would like to reach out and talk with me, fill out the information on Contact Me or email at st.john.bannon@JMCapGroup.com