My home equity loan was paid off and I went to a reverse mortgage. Does this qualify as a refinanced loan?

Forum|Forum|7 years ago
June 4, 2019
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Reverse mortgage is totally different that a mortgage that has been refinanced.

A reverse mortgage is a mortgage loan, usually secured over a residential property, that enables the borrower to access the unencumbered value of the property. The loans are typically promoted to older homeowners and typically do not require monthly mortgage payments.

Refinanced mortgage is to lower your monthly payments, pay off your loan sooner, or access cash for a large purchase. Use our home value estimator to estimate the current value of your home.

Anonymous

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Reverse mortgage is totally different that a mortgage that has been refinanced.

Refinanced mortgage is to lower your monthly payments, pay off your loan sooner, or access cash for a large purchase. Use our home value estimator to estimate the current value of your home.

VivanRuhan

Level 2

Based on your description, the answer is generally yes — shifting a home equity loan to a reverse mortgage will usually constitute a refinance. This is since you are adding a new lien to the property (your old loan being paid off) essentially means refinancing.

Within that framework, the new lien is a reverse mortgage, and they operate a bit differently, relative to your mortgage loan. Instead of making payments every month, the reverse mortgage will pay you back using your equity in the property. This is outlined by the U.S. Department of Housing and Urban Development (HUD), in the section on Home Equity Conversion Mortgages - they talk specifically about the prior debts being paid off to setup the reverse mortgage.

To understand how a reverse mortgage fits the refinance definition you inquired about, the explanation on reverse mortgage's HECM refinance guide outlines the definition and benefits, including the if you qualify for a refinance under their switching lender rule exemptions for reverse mortgages.

So yes, while it is technically a refinance, the distinction from a non-reverse mortgage refinance is that you were not adjusting the terms of a fixed payment instead, you are converting your home equity into cash flow.