Question from our reader:
“We have a reverse mortgage, but we were never told that there was a reverse mortgage for veterans. We have quite a bit of equity in our home. Can we refinance our current reverse mortgage to a VA reverse mortgage?” -Debbie
FHA and VA don’t offer loans directly.
HUD through FHA insures loans and the VA guarantees loans (or at least a portion of the loan), but they still do not offer the loans – it is up to lenders to offer the loans and then have them insured or guaranteed by those entities.
Every few years I hear of a “reverse mortgage for veterans“ and when I research it, there are multiple articles and plenty of information wherein people call their program a “Veteran’s Reverse Mortgage” or a “Kosher VA Reverse Mortgage” or some other such wording but I have yet to see an actual program that is a reverse mortgage loan under a separate set of guidelines, offered by lenders and guaranteed by the VA.
Being that I have received this question several times recently and I would never claim I have a corner on all knowledge (and my wife will vouch for that), I decided to look yet again when I received your request to see if there was any new information.
I first checked the U.S. Department of Veterans Affairs website. They talk about the lending programs available to US Veterans.
There is information available about Purchase and Cash out Refinance Loans, Interest Rate Reduction Refinance Loans (aka IRRRL) and even Native American Direct Loans – but no VA guaranteed Reverse Mortgages.
When I type reverse mortgage in the search box, it takes me to a page on the index that is a warning issued by the Consumer Finance Protection Bureau in conjunction with the VA warning lenders and other advertisers to keep their advertising clean!
The notice from 2012 warns everyone that it is a crime to promise things that are not available and to mislead veterans and older Americans into thinking that there are programs that are not available.
The notice specifically names reverse mortgages and those who would mislead consumers into thinking that there was a government affiliation that did not exist.
I was 99.9% sure of what I would find before I checked because also as a member of the National Reverse Mortgage Lenders Association, we receive constant updates on programs as they become available.
Had there been a VA Reverse mortgage released recently or about to be, even though we are not currently a VA approved lender, I was confident that information would have reached us by now.
I think you have gotten the same thing a lot of borrowers have, some sort of notification wherein the term “VA Reverse Mortgage” or other similar language was used but then they go on to call the program a HECM – which is the acronym for a Home Equity Conversion Mortgage, the HUD or FHA program, not a VA program.
Finally, I checked the Consumer Financial Protection Bureau’s website directly and found the answer I was looking for.
This was on the official government consumer protection site regarding this exact issue: https://www.consumerfinance.gov/ask-cfpb/i-saw-an-ad-for-a-no-payment-reverse-mortgage-from-the-department-of-veterans-affairs-va-is-this-legitimate-en-1719/:
So Debbie, there you have it.
I am sorry to say that the VA does not offer the program you seek so the answer to your question ultimately is no, you would not be able to refinance your current reverse mortgage with a “VA reverse mortgage”.
Furthermore, if you get an ad from someone saying they have such a program, I would suggest you toss it in the trash immediately because that’s probably where it belongs!
Does the VA offer reverse mortgages?
Currently the VA does not offer any reverse mortgage loans.
Can you refinance a VA loan to a reverse mortgage?
Yes. A reverse mortgage loan can be used to pay off any type of existing mortgage on the property if there are enough funds to do so.
Can I sell my house if I have a reverse mortgage?
Yes. A reverse mortgage loan has no prepayment penalty so you can sell your home at any time and pay off the reverse mortgage.
Can you refinance a reverse mortgage to a VA loan?
Yes. Whether by a sale or a refinance, a reverse mortgage loan can be paid off at any time without penalty.
Veteran Mortgage VS HECM Product Comparison
|Compare Features||HECM Reverse Mortgage||VA Mortgage|
|Borrower Minimum Age||62||18|
|Income Requirements||Limited||Full Documentation|
|Credit Score||No Minimum||660|
|Reserves||No Minimum||2-6 Months PITI|
|Average Fixed Rate||3.06% (4.06% APR)||2.625% (2.913% APR)|
|Loan Duration||For Life||15-Year, 30-Year|
|$0 Monthly Payment Option||Yes||No|
|Low/No Closing Costs||No||Yes|
|Monthly Mortgage Insurance||.50% Monthly||None|
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