More older homeowners (aged 62 and older) are resorting to reverse mortgage during their golden years. With this said, sometimes these homeowners change their minds and decide that a reverse mortgage is no longer for them. This leads to a common question of whether or not this type of mortgage can be reversed or not.
The short answer is yes, you can change a reverse mortgage once you’ve started it, but the options and ease depend on your specific situation, timing, and goals. Most changes involve either a simple payment plan modification (low-cost and straightforward) or a full refinance into a new reverse mortgage or even a traditional forward mortgage.
Understaning A Reverse Mortgage
A reverse mortgage, typically a Home Equity Conversion Mortgage (HECM) insured by the FHA, lets homeowners aged 62+ convert home equity into cash without monthly mortgage payments. Funds come as a lump sum, monthly payments, line of credit, or combination. The loan balance grows over time with interest and fees, becoming due when the last borrower sells, moves out permanently, or passes away.
Once started, the loan isn’t locked in stone. Borrowers often seek changes due to shifting needs like accessing more cash (from home appreciation), switching payment methods, adding a spouse, lowering costs, or exiting the program entirely.
Options For Modifying A Reverse Mortgage
Option 1: Modify Your Payment Plan (Easiest Change)
If you have an adjustable-rate HECM with remaining funds available, you can often switch between the five standard payment plans (e.g., from monthly payments to a line of credit or lump sum) without refinancing.
- Contact your loan servicer directly.
- Pay a small fee (often around $20–$50).
- Complete some paperwork.
This works well if you want to reallocate unused proceeds or adjust how you receive money. It doesn’t require a new appraisal, counseling, or full underwriting in most cases. However, if you’ve already drawn all available funds, this option won’t help much.
Note: Fixed-rate reverse mortgages have fewer modification options since they usually disburse as a single lump sum.
Option 2: Refinance into a New Reverse Mortgage
Refinancing replaces your current reverse mortgage with a new one that pays off the old balance and sets updated terms. This is the primary way to make bigger changes.
When Refinancing Makes Sense
- Your home value has increased significantly → unlocking more equity.
- Interest rates have dropped → potentially lowering costs.
- You want a different product (e.g., switch from HECM to a proprietary/jumbo reverse mortgage for higher limits).
- Life changes occur, such as marriage (adding a spouse who is now 62+) or divorce.
- You need to remove a required set-aside (e.g., for taxes/insurance).
- New loan features or higher borrowing limits become available.
Many lenders require waiting at least 18 months after your original closing before refinancing. A “benefit test” (sometimes called the 5-times benefit test) must show that the new loan provides meaningful financial advantage to you after costs.
Refinancing Process
The process mirrors originating a new reverse mortgage:
- Shop lenders and compare offers.
- Get a new home appraisal.
- Undergo financial assessment (to confirm you can maintain taxes, insurance, and home upkeep).
- Complete HUD-approved counseling again (though some states allow reusing your original certificate within 5 years).
- Close on the new loan, which pays off the old one.
You can refinance HECM-to-HECM, HECM-to-proprietary, or even into a conventional forward mortgage if you want to start making payments again.
Costs to Consider: New closing costs, origination fees, and mortgage insurance premiums apply. Ensure the benefits outweigh these expenses.
Option 3: Exit the Reverse Mortgage Entirely
You can “change” by getting out of it completely, with no prepayment penalties on most reverse mortgages.
Common ways:
- Pay it off with savings, inheritance, or other assets.
- Sell the home — use proceeds to repay the balance; keep any remainder.
- Refinance into a traditional mortgage — if your income/credit allows, this resets you to monthly payments and rebuilds equity for heirs.
- Right of rescission — cancel within 3 business days of closing (notify lender in writing).
If circumstances change dramatically (e.g., you no longer want the growing balance or prefer traditional debt), these paths restore flexibility.
Key Considerations and Potential Drawbacks
- Timing Restrictions — The 18-month wait and benefit test protect borrowers from unnecessary costs.
- Costs Add Up — Refinancing repeats many upfront fees (origination, appraisal, counseling, insurance). Modifications are far cheaper.
- Eligibility — You must still meet age, homeownership, and financial requirements (e.g., ability to pay property charges). A new financial assessment occurs.
- Impact on Heirs — Any change that increases the balance reduces remaining equity.
- Taxes and Insurance — You remain responsible; failure can trigger default.
- Counseling — Always required for new HECMs to ensure you understand risks.
Refinancing or modifying isn’t always the best move. Run the numbers with a trusted lender or financial advisor to confirm a net benefit.
When It Might Not Be Worth Changing
- If home values haven’t risen enough or rates haven’t improved meaningfully.
- If closing costs would erase potential gains.
- If you’re happy with your current payment plan and have sufficient funds.
In some cases, voluntary partial repayments (allowed without penalty) can reduce the balance without a full change.
Summary
Final Advice: Consult Professionals Early
Reverse mortgages are complex and regulated, with rules evolving (e.g., FHA adjustments to principal limits or protections for non-borrowing spouses). Speak with:
- Your current servicer (for modifications).
- Multiple reverse mortgage specialists.
- A HUD-approved counselor.
- A financial planner or estate attorney.
They can review your loan statement, run scenarios, and help decide if a change aligns with your retirement goals.
Changing a reverse mortgage is possible and sometimes highly beneficial—especially with home appreciation or shifting needs—but it requires careful evaluation to avoid unnecessary fees. Start by contacting your servicer or a reputable lender for a no-obligation review of your specific loan. With the right steps, you can adapt your reverse mortgage to better fit your life today and in the years ahead.
Are you thinking of buying or selling real estate in the South Florida area? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, be sure to download the free Florida Home Search App for your smartphone or tablet.
This article is for informational purposes only and not financial, legal, or tax advice. Reverse mortgage rules can vary by loan type, state, and time—always verify with qualified professionals and official HUD resources.
