Generations ago, homeowners lived in the same house for decades and many paid off their mortgages. These days, it’s not so easy. Underwater mortgages, foreclosures and fallout from economic uncertainty have dramatically affected the way homeowners are dealing with unique home-debt issues. No population is as adversely affected as are seniors, but that doesn’t mean there are no refinancing options for the silver set. You deserve to live a relatively worry-free life after retirement, so consider various refinancing options and choose the one that fits best.
Refinance With Your Current Lender
Nobody knows you and your credit history better than the bank, mortgage company or credit union currently holding your mortgage, and while interest rates are affordable, make this your first step as you seek to refinance. Contact a loan officer and make an appointment to see if you have enough equity in your home to get a lower interest rate. If you would rather not do business with your lender, contact a mortgage broker. These intermediaries will shop mortgages for you. As long as you’ve got good credit, she can point you to a few senior-friendly lenders.
This popular method of easing financial burdens is simply a return on the cash you’ve already invested in your mortgage over the years. If you have amassed enough equity, you can stay in your home and receive a monthly payment from your mortgage company that taps that equity. Some lenders are willing to set up 30-year reverse mortgage arrangements for seniors, though you may not be as amenable to a commitment that long! Be forewarned: Banks charge a variety of fees to handle the complicated paperwork required to underwrite a reverse mortgage, so ask your lender about these before you jump in.
Home Equity Conversion Mortgage (HECM)
Like reverse mortgages, the HECM is structured just like a standard reverse mortgage, but there’s government intervention here, so the cost of getting into this financial arrangement is more manageable for seniors. To qualify, you must be 62 or older and your house (single family, condo, quad or planned unit) must meet minimum Housing and Urban Development standards. Since the Federal Housing Administration regulates HECMs, you will work with them to determine the best plan for your unique situation. Fees and costs for this type of refinance are minimal, so you don’t have to worry about incurring more debt to obtain yours.
Mortgage Loan Modification Program
Massachusetts is typical of states helping low-income seniors stay in their homes by offering a mortgage loan modification program. These can work miracles for seniors whose homes are underwater or whose incomes won’t allow another refinancing option. That said, the paperwork you’ll be asked to complete for a loan modification refinance is formidable. Survive it and you’ll be in great shape. Your interest will be lower than your previous mortgage and some of your loan may be forgiven or deferred. Most lenders can help with this type of refinance so you can get back to bridge, woodworking classes and anything other than worrying about your mortgage.