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5 facts about refinancing a reverse mortgage loan

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You'll get a credit on your loan insurance
You'll get a credit on your loan insurance | Caiaimage/Getty Images

You'll get a credit on your loan insurance

Most reverse mortgage loans are insured by the Federal Housing Administration under its home equity conversion mortgage (HECM) program. The FHA offers consumer protections, including the promise that you'll never owe more than your home is worth at the time the loan comes due.

In exchange for those safeguards, the FHA requires the borrower to pay mortgage insurance, including an initial premium due at closing of at least 0.5 percent of the appraised value of the home.

The good news with a refi is that you get a credit for the upfront mortgage insurance premium you paid on your original reverse mortgage loan.

If the new initial premium is higher, some lenders will pay the difference, says Lafaye. Others will simply roll that into the new loan balance.

Remember that your refi -- like any reverse mortgage loan -- also will require you to pay ongoing mortgage insurance premiums equal to 1.25 percent of your outstanding loan balance each year.

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