There are a number of home refinancing options for seniors that can significantly reduce mortgage monthly payments and home loan interest rates. This can be valuable for those living on a fixed income.
How can you refinance your loan? You can look into home equity loans, a home equity line of credit, reverse mortgages, and other refinancing options we will dive deeper into below.
For example, some refinancing options are only for seniors 62 years of age or older, like a refinance via a reverse mortgage. And reverse mortgages are tax-free, which makes them very enticing to seniors.
Let’s take a closer look at how to apply for refinancing as a senior on a fixed income, how to get approved, and refinancing options.
Seniors Can Apply To Refinance, Even On A Fixed Income
When you refinance your home loan, you are simply replacing your loan with another loan that is better. This can be valuable for seniors on a fixed income. The benefits include lower interest rates on the new loan, reduced monthly loan payments, and cash on hand.
“When you refinance, you get a new mortgage to pay off your existing mortgage,” Amy Fontinelle explained in a Forbes article. “Refinancing works just like getting a mortgage to buy a house. You’ll be free from the stress of home buying and moving, though, and there’s less pressure to close by a certain date.”
The first step to refinancing as a senior with a fixed income is to apply. You can also apply for refinancing with a number of lenders. You are never stuck using your current home loan lender.
Next, the application will go through a review process, which usually involves you sending in required documentation of your current loan, your current fixed income, and other important paperwork for the lender to make a decision.
How To Increase Refinancing Approval On A Fixed Income
The good news is that you can improve your chances of getting a new refinance loan. Sometimes the best place to start when considering a home loan refinance is your current home loan lender.
This is helpful, because your current lender already knows your loan situation, your fixed income streams, and other important financial information. The refinancing process may also be faster when using your current lender.
However, you are refinancing for a reason, and you may get better loan terms and more options that fit your needs when going with a different home loan lender. Be sure to do your due diligence and weigh lender options carefully.
It is also important to have all your fixed income at the ready to increase approval odds and make the process faster. Income streams include:
- Military pension and veteran benefits
- Social security monthly payments
- Settlement payments
- Stocks and other investment income
- 401k, IRA payments, and retirement accounts
- Alimony monthly payments
Having the above fixed income as a senior looking to refinance can certainly be beneficial. It also gives you, the borrower, a closer look at your monthly income and finances.
Top Mortgage Refinancing Options For Seniors You Need To Know
With application and approval details out of the way, let’s take a closer look at the different refinancing options for seniors on a fixed income. There are a few options listed below that may be worth considering for your future home loan refinance.
- Reverse Mortgage: A reverse mortgage is a popular choice for seniors looking to refinance. It is specifically for seniors 62 years of age or older that could use an injection of income to make retirement more comfortable. A reverse mortgage is when you switch your home’s equity to a new loan, getting monthly cash in a number of ways, like term payments or hybrid payments. The best part is that you still own your home and don’t pay the old mortgage anymore.
- Rate & Term Refinancing: Making monthly mortgage payments can prove challenging for seniors on a fixed retirement income. Especially during times of economic uncertainty. A rate and term refinance option can reduce interest rates and the entire loan amount balance. The monthly payments will be reduced with a longer term mortgage.
- Cash Out Refinancing Option: Having a ton of home equity can prove useful when it comes to the cash out refinancing option. What is cash out refinancing? This is when you take a higher principal on your loan and receive a cash payout in return. This can really help reduce debts that may be very high interest.
- Home Equity Loan Refinance: Another refinancing option for seniors on a fixed income is a home equity loan. This refinancing option is exactly as it sounds, a loan based on the equity you currently have on your home. This is not a traditional refinance, but it is often similar to other refinancing options. Essentially, you take a second mortgage, giving you higher monthly payments, but you have more cash on hand to reduce other debts or make big purchases.
Wrapping Up . . .
The above refinancing options for seniors are only the tip of the iceberg when it comes to refinancing options. The refinance loan you choose may simply depend on your needs during retirement. From reverse mortgages to home equity loans, research what loan option is best for you.