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Funds available..170000...interest killing me..$704 per month...orig funds was 194000..interest 170...is there anyway to curtail interest climbing...I’m taking out 1500 per month and interest 700...ouch!..... can I switch to another reverse mortgage lender?

By Charles H. on 11.28.2018

Hi Charles,

The interest accrues on the balance owed.  If you had a regular forward or standard loan with this outstanding balance, you would be paying that much and more in monthly payment to pay the interest and some of the principal to repay the loan over the term.  Instead, the interest accrues and then is added to the balance which causes the balance to grow. 

While reverse mortgages never require a payment, there is never a prepayment and you can make a payment of any amount at any time, without penalty.  If you do not want the interest to grow, you can pay the interest that accrues each month all or in part.  If you pay any portion of the interest monthly, the amount owed will grow at a slower rate.

If you pay all the interest or all the interest and then some additional amount, then the balance would either remain stable or begin to shrink just like a typical forward loan.  The real advantage here is that since there is no payment due, there is no payment due date and you can make whatever payment you want whenever you want to make it.  If a payment is not comfortable to make in any given month, there are no adverse effects because it was not required in the first place.

Refinancing into another reverse mortgage loan would only require additional costs that would drive your balance up.  Most borrowers would not benefit from a refinance if the goal is to try to lower the balance owed or retard the interest being accrued, especially since rates have increased in recent times, not decreased.  If you are serious about lowering the interest, I would suggest you consider looking into possible monthly payments in some amount that is comfortable for you. 

You can always refinance into a standard loan, but then you also must make the monthly payment on that loan month in and month out on that schedule.  You don’t have the option to skip months when payments are not comfortable and if you run into several months in a row with income difficulties, you run the risk of lender actions for non-payment.

 

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